%VfS oA Policy Research Trade Policy Country Economics Department The World Bank August 1992 WPS 951 Piece ne a Trade Reform in Parti Ily L'beralized Economies An Evaluation for Turkey Glenn W. Harrison Thomas F. Rutherford and David G. Tarr Given Turkey's already extensive trade liberalization, a move to uniform external incentives would bring most of the benefits of full trade liberalization. Moreover, it is not enough to have piecemeal reform of tariffs or export subsidies alone. Harmoniz- ing Turkey's already low tariffs to the European Community's tariff structure will improve Turkey's welfare only if Turkey at the same time removes or reduces its export subsidies. Policy Research Working Papers disseminate the findings of work in progress and encouTage the exchange of ideas among Hank staffand all others intersted in development issues. Thesepapers, distributed by the Research Advisory Staff, carry the names of the authors, reflect only theirviews,andshould beused and cited accordingly.Thefindings, intcrpretations, andconclusions arethe authors'own. Theyshould not be attributed to the World Bank, its Board of Directors, its management, or any of its member countries. Policy Research Trade Pollcy WPS 951 This paper-a productof theTrade Policy Division, Country Economics Department-is partof the Bank's research on "The Impact of EC 1992 and Trade Integration in Selected Mediterranean Countries (RPO 675-64)," funded by the Research Support BudgeL Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Dawn Ballantyne, room N10-019, extension 38004 (August 1992,34 pages text plus 34 pages appendices). Turkey undertook a major liberalization of trade 1985 level (about twice the 1989 level of the authors' policy in the 1980s. Import quotas have virtually benchmark model) - which reintroduces an anti- disappeared, the Turkish lira was made convertible, export bias. In this case, piecemeal tariff reduction to and tariffs are gene.rally lower. Those changes and the the 1989 level is beneficial. export subsidies that remain have, on the whole, removed the anti-export bias from Turkey's external In Turkey, even small export subsidies are not incentive regime. always be,neficial, despite the rule of thumb that small export subsidies are a welfare-enhancing offset to the Using a 40-sector computable general equilib- anti-export bias of import tariffs. Why? Because rium model, Harrison, Rutherford, and Tarr consider export subsidies in Turkey are highly dispersed, and several more trade liberalization options available to piecemeal reductions in the export subsidies reduce the Turkish govemmenL They conclude that unifor- that dispersion. When the authors counterfactually mity of tariffs and export subsidies would substan- impose uniformity of tariffs and export subsidies, tially improve Turkey's welfare. they resurrect the rule of thumb that small export subsidies are beneficial as a piecemeal policy for Although the "Ramsey" optimal import taxation offsetting the anti-export bias. would call for non-uniform import taxes inversely proportional to the elasticity of import demand in each Policymakers in developing countries have sector, the observed dispersion of the tariff structure in occasionally applied export subsidies in individual Turkey is inconsistent with optimal departures from sectors with high tariffs as a means of encouraging uniform protection. In fact, in Turkey uniformity exports in a sector that may otherwise rely only on the achieves an extremely high proportion of the benefits of highly protected domestic market. The authors show full trade liberalization because, in the absence of a that in Turkey high export subsidies in sectors with general anti-export bias, the principal distortion remain- high tariffs are particularly counterproductive - ing in the trade regime derives from dispersion of the because at the multisector level the distortion intro- tariff and (especially the) export subsidy structure. duced by the export subsidy (by encouraging too many resources into the protected sector) dominates Like Turkey, an increasing number of developing the reduction in the overall anti-export bias. countries - including Chile, Indonesia, Mexico, and Poland - have in recent years undertaken extensive Turkey's proposed policy of harmonizing its trade liberalization. It is no longer clear that these tariff to the European Community's common external economies retain an anti-export bias in their trade tariff would yield only small welfare changes, which regime. Perhaps the most important policy conclusion would be small losses as the European Community the authors reach is that one must be wary of advocat- interprets harmonization. Why? Because harmoniz- ing piecemeal reform of tariffs or export subsidies ing to EC tariffs will require lowering Turkish tariffs alone. In Turkey, piecemeal across-the-board tariff from already low levels, in the presence of export reductions do not always improve welfare; they must subsidies almost as large as the existing averagc generally be coordinated with reductions in export effective tariff rate. But harmonizing to the EC tariff subsidies to ensure improved welfare. The authors structure can be beneficial if at the same time export counterfactually assume that Turkey's tariffs are at the subsidies are removed or reduced. The Policy Research Working Paper Series disseminates the findings of work under way in the Bank. An objective of the series is to get these fmdings out quickly, even if presentations are less than fully polished. The findings, interpretations, and conclusions in these papers do not necessarily represent official Bank policy. Produced by the Policy Research Dissemination Center Piecemeal Trade Reform in Partially Liberalized Economies: An Evaluation for Turkey by Glenn W. Harrison Thomas F. Rutherford and David G. Tarr' Table of Contents 1. Introduction I 2 A Small Open Economy Model 4 2.1 General Model Structure 4 2.2 The Turkish SOE Model 6 3. Policy Analysis 10 3.1 Uniformity 10 3.2 Across-the-Board Liberalization 12 3.3 Sectoral Liberalization 19 3.4 Harmonization with the European Communities 24 4. Sensitivity Analysis 26 5. Conclusions 30 References 32 Appendix A: Algebraic Formulation of the Model A-1 Appendix B: The Trade Regime in Turkey - A Quantitative Assessment of Tariff, Nontariff Barriers, and Export Incentives B-1 Appendix C: Calibration of the Model C-1 Appendix D: Sensitivity Analysis of Results D-1 * Dewey H. Johnson professor of economics, Department of Economics, College of Business Administration, University of South Carolina; assistant professor, Department of Economics, University of Western Ontario; and senior trade economist, World Bank. This study is part of the World Bank's research on "The Impact of EC 1992 and Trade Integration in Selected Mediterranean Countries," supported under RPO 675-64. The authors would like to thank Deborah Bateman, Marylou Uy, Omer Karasapan, and Michael Klein for helpful comments on the data appendix. 1. INTRODUCTION Turkey has undertaken a major liberalization of trade policies in the decade of the 1980's. Import quotas are virtually non-existent, the Turkish lira has been made convertible, and tariffs have generally bven lowered so that the average nominal tariff rate is less than 10 percent. Given these changes and remaining export subsidies, Turkey has on average removed the anti-export bias from its external incentive regime. The impact on Turkey of its import-substitution trade policies in the 1970's and of its trade liberalization in the early 1980's has been the subject of a number of earlier studies, notably Baysan [1984], Baysan and Blitzer [ 1988; 19911, Rodrik [ 1988b] and Grais, de Melo and Urata [19861. We take as our point of departure the relatively liberal trade regime of Turkey in the late 1980's, and, employing a 40 sector computable general equilibrium model, consider several further trade liberalization options that are now open to the Turkish government. The first option is the principal trade policy change Turkey is planning to implement: harmonization of the tariff structure to the common external tariff of the European Communities (EC). This option is part of Turkey's effort to continue to press its case for membership in the EC. The second option is for Turkey to completely remove all trade barriers, including import tariffs and export subsidies. The third option is the adoption of a uniform protection structure, removing the sectoral dispersion of nominal tariffs and export subsidies. The final option is to consider sectoral liberalizations of tariffs or export subsidies. We present a formal quantitative model that allows an evaluation of the effects of these options. The first conclusion that we draw from our analysis is that tariff and export subsidy uniformity yields substantial benefits in welfare terms for Turkey. Although 'Ramsey' optimal import taxation would call for non- uniform import taxation inversely proportional to the elasticity of import demand in each sector, the observed dispersion of the tariff structure in Turkey is inconsistent with optimal departures frotn uniform protection. In fact, in the case of Turkey uniformity achieves an extremely high proportion of the benefits of full trade liberalization. This result is explained primarily by the substantial trade liberalization Turkey has undertaken during the decade of the 1980's. Given the prevailing export subsidies and low level of import protection, the trade regime no longer has a general anti-export bias. The principal distortion remaining in the trade regime derives from the dispersion of the tariff and export subsidy structure, especially the latter. The evaluation of removal of trade barriers yields what is perhaps our most important finding: first best rules-of-thumb that may be appropriate for highly distorted economies need not be appropriate for economies that have liberalized as much as Turkey. In particular, piecemeal across-the-board tariff reductions are not always beneficial from a welfare perspective, and generally must be coordinated with export subsidy reductions in order to ensure welfare gains. If we counterfactually assume that the tariff level of Turkey is at the level of 1985 (about twice the 1989 level of our benchmark model), this reintroduces an anti-export bias in the external incentive regime. In this case piecemeal tariff reduction to the 1989 tariff level is beneficial. Moreover, in the case of lurkey, even small export subsidies are not always beneficial, despite the rule-of-thumb that small export subsidies are a welfare enhancing offset to the anti-export bias of import tariffs. The reason is that export subsidies in Turkey are highly dispersed. so that piecemeal reductions in the export subsidies are beneficial because the dispersion is reduced as a result. We show that if we counterfactually impose uniformity of export subsidies and the tariffs, the rule-of-thumb that small export subsidies are beneficial as a piecemeal policy for offsetting the anti-export bias of the tariff is resurrected. As Turkey turned away from import substitution in the early 1980's, it adopted strong export promotion measures. Few would object to the stongest measures it took in swithching incentives toward exports, namely the reduction in high import barriers and real exchange rate depreciation. However, the more direct export incentives (such as budgetary transfers) have been the subject of controversy regarding their effectiveness and their welfare effects. I During the last half of the 1980's, however, direct export incentives have also been reduced. In order to assess whether there were benefits of the export subsidy reduction, we counterfactually scale up all export subsidies so that the average export subsidy is at the higher level of 1985 (as well as some other years), and simulate the effects of the Turkish policy of lowering export subsidies toward the level of 1989. Starting from the level of import protection of 1989, this tilts the external incentives toward export promotion and, more importantly, greatly 'See Milanovic 119861, Rodrik f1988al and Arslan and van Wijnbergen (19901 for discussions of the expont incentive progam and estimation of its effectiveness in encouraging exports. These studies, however, did not asse the welfare effects of the export incentives. -2 - increases the dispersion in the export subsidies as well; then the policy of export subsidy reduction yields very substantial welfare benefits. Like Turkey, in recent years an increasing number of developing countries, such as Mexico, Chile, Indonesia and Poland, have undertaken extensive trade liberalization. It is no longer clear that these economies retain an anti-export bias in their trade regime. Our results show that in such cases one must be wary about advocating piecemeal reform of tariffs or export subsidies alone. Policy-makers in developing countries have occasionally applied export subsidies in individual sectors with high tariffs as a means of encoutaging exports in a sector that may otherwise rely only on the highly protected domestic market. We show that this policy is particularly counterproductive, because at the multisector level the distortion that the export subsidy adds by encouraging too many resources into the protected sector dominates the reduction in the overall anti-export bias. Another important policy conclusion that we draw is that the EC harmonization strategy is significantly inferior to any of the other strategies. Our examination of the policy of harmonizing the Turkish tariff to the common extemal tariff of the EC shows that there are generally small welfare changes involved.2 This result follows simply from the fact that harmonization to EC tariffs will require a lowering of Turkish tariffs from already low levels, in the presence of export subsidies almost as large as the existing average effective tariff rate. Beyond small reductions in the tariff, the export subsidies become the dominant distortion to the trade regime, and the economy becomes too export oriented. We argue, however, that harmonization to the EC tariff structure can be a welfare enhancing policy if accompanied by a policy of removing or reducing export subsidies. The important policy lesson for Turkey from this exercise is that if it intends to proceed with harmonization to the EC common external tariff, it is important to accompany that policy with a reduction in export subsidies. The model that we use is deliberately very simple, to facilitate the confrontation of policy-makers' intuition with easily interpreted simulations. The model assumes no terms-of-trade effects, a single household, no capital accumulation, and constant returns to scale production with competitive pricing. In work in progress we examine 2 For small reductions in the tariff, which was Turkey's interpretation of harnonization, there are small welfarm gains. For larger tariff reductions, which is the interpretation of the EC, there are small welfare losses. -3- in detail the implications of relaxing some of these assumptions in the present model. We readily concede that relaxing these assumptions could alter our conclusions, but they would not facilitate our assessment of the rules-of- thumb in a clean and simple environment. An important component of any practical trade liberalization package is the way in which the revenue effects of the policy are treated. We exploit the ability of a 'simulation laboratory" to control for these effects by adopting an explicit replacement tax such that government revenue remains constant. We allow the value addJ.d tax or a lump-sum tax serve as replacement taxes for any changes in revenue. In the absence of any other changes in policy the first tax effects distortionary replacements, whereas the lump-sum tax is non-distortionary in our model (there is no labor-leisure choice). In the case of Turkey we find that the value added tax is an excellent 'real-world' alternative to the theorists' lump-sum replacement tax, in the sense that it has a relatively small marginal excess burden for the range of revenue replacements required here. In Section 2 we outline the model that has been developed, including the procedures used to empirically estimate the model to the Turkish economy using 1985 input-output data and 1989 protection data.3 In Section 3 we report the results of our policy simulations. Finally, in Section 4 we draw our conclusions for policy. 2. A SMALL OPEN ECONOMfY MODEL 2.1 General Model Structure Our Small Open Economy (SOE) model is designed for trade policy analysis with a large number of sectors. The model is a "generic' general equilibrium model of a single economy along the lines of de Melo and Tarr [ 19921. The distinguishing feature of the model is that it effects a simple closure with respect to foreign tmade such that the economy experiences no terms-of-trade effects. 3 Formal details of the algebraic structure are presented in Appendix A. Appendices B and C provide additional details about recent developments in the tade regime in Turkey and the specific estimates used in our model. -4- Goods are produced using primary factors and intermediate inputs. Primarv factors include labor and capital.4 In export sectors a composite output is produced which distinguishes between goods destined for domestic and export markets. This trade-off is characterized by a constant elasticity of transformation frontier. Production may either exhibit constant, uicreasing or decreasing returns to scale. When there are constant or decreasing returns, producers behave competitively, selecting output levels such that marginal cost at those output levels equals the given market price. In the present version of the model we assume constant returns to scale in production for all sectors. Final demand by private households arises from nested constant elasticity of substitution utility functions. At the first level imported goods trade off with corresponding domestic products, with possibly different elasticities of substitution by commodity. At the top level different types of goods enter in a constant elasticity aggregate. All income elasticities are unity. Five types of trade distortions are included in the model: (i) ad valorem tariffs (or subsidies) on imports, (ii) ad valorem export subsidies, (iii) non-tariff barriers in the form of fixed, tariff-equivalent ad valoren price wedges, (iv) import quotas, and (v) voluntary export restraints. Tariff revenues and export subsidy payments appear in the government budget, while all rents from NTBs, import quotas and VERs are returned lump-sum to domestic consumers.5 In order to capture the erfects of geographically discriminatory protection policies we allow imports and exports to bear different tariffs or subsidies depending on their source or destination. This feature allows us to study policies such as harmonization or accession to a free trade area, albeit in the absence of any terms-of-trade effects. Imports from different sources substitute with each other at a lower nest in utility to form a composite import good for each sector which enters the top-level of the utility function. Govenunent expenditures and investment demand are exogenous. Funding of government expenditures is provided by net tax revenues. There are three other components of government income in addition to import tariffs 4 7be general model hiucture accommodates additional factors such as land (for agricultural preduction), rcsources (for xtractive industries), or sector-specific capital (in the Ricardo-Viner tradition). 5 Tere is no rent-disipation, so the model only measures the distoftion cost of trade restrictions. Thus our welfare measues neglect rent-seeking losus if any are present. -5- and export subsidies. These are (i) value-added taxes on factor inputs to production, (ii) ad valorem production subsidies or excise taxes on production output, and (iii) lump-sum taxes on domestic consumers. In a counter-factual scenario one or more of the tax inst: 'nents adjusts endogenously to balance government (net) tax revenues with expenditures. This equal-yield constraint is accommodated through -i endogenous proportional adjustment of value- added tax rates or lump-sum transfers. Thus the welfare effects of changes in trade policy explicitly incorporate the appropriate marginal excess burden of raising government revenue from other sources. Demand functions are uncompensated, so Walras law guarantees that the value of private consumption equals the income from primary factors, taxes, and import and export quota rents. Public consumption is balanced with the value of public endowments and tax revenue. World market import and export prices are given, and there are no endogenous changes in the terms of trade. In other words, import supplies and export demand are infinitely elastic. The current account balances the value of exports and imports taking into account exogenously-specified capital inflows. 2.2 The Turkish SOE Model The SOE model is relatively easy to implement empirically. One requires a consistent set of Input-Output accounts or a Social Accounting Matrix showing the standard intermediate, final demand and value added transactions. Additional estir-itts of tariff rates, tax rates, or subsidy rates may also be needed, depending on the detail of the Input-Output database. Estimates of elasticities must be assembled for primary factor substitution, import demand, import source, domestic demand, and the transformation of domestic supply into domestic and exported products.6 We employ a 1985 Input-Output table distinguishing 64 production sectors.7 We aggregate this to 40 sectors, selecting to aggregate the smallest 24 sectors which account for only 5.1 % of the value-added of the 6 In detail, these elasticities refer to the elasticity of substitution between primary factors of production in each sector, the elstieity of substitution between domestic production and an imports composite in each sector, the elasticity of substitution between imports distinguished by source, also by sector, the elasticity of substitution between domestic consumption of each good (the components of which are, in tum, composites of domestic and imported production); and the elasticity of tmnsformation of domestic production into domestic uses and export. 7 This is the latest Input-Output table available for Turkey as of late 1990. -6 - Table 1: Sectors and Policies in the Turkish Model (percentages) 1985 1989 Epo P ID 5ecr Turif Tarifls Subskid VAT Subsidhj AGR Avictiltm 4.1 6.0 0.9 4.2 AIR Air Trm u 2.3 ALC Alic Bewetps 22D ?23 8.2 4.7 ANI ArWl Hu Yam1, 15.6 6.0 0.9 APP WeJ_ 83 Z8 13.5 1a PLD Bu1M1d Ca..ut,rtK .Ih, CEM Ca 3.9 2.6 18.0 7.5 CUM Other Chmmi Prcdiu 19.8 15.? 13.7 11.4 2.4 COL Coal MhIns 0.7 0.7 7.0 3.4 COM C K n 2.S 6.3 2.1 2.0 CON Otbcf C,uut__ 4.5 ELE El iy 3.6 2.0 EIM Ekria] Macdicry 35.3 11.0 29.7 9.4 FAR Fabhritad Metsl Prmhxu 46.4 10.0 69.7 12.8 FIN F _uaI _outWoJm A - w.w 9.7 FIS F'ilr 23.5 34.9 0.) FOR FoiY uy M0.5 3.9 1.1 FRT Fatiliur, 1.3 2.5 IS.? 2.5 0.9 GAS Gas MondetWm & W*wvrb 3A G15 Glum a Glas pudu 63.0 31.8 169 5.2 1914 ImI & Sil 16.3 4.6 21.4 20.I LND Otbor Land Tmnport 3.6 MAC Mety exo Eleeta] 20.2 10.5 9.6 6.0 0.6 MEA MNW Prosig, 13.7 4.2 8.2 1.8 OFP MmdXacw or Oftr Food Pra]uet 33.7 30.1 8.2 15.0 OMP Other NrlueliIc Miurul P rou=tm 27.1 32.5 9.5 OWN OwulbJp of DwUlw 2.0 mPS P cados & Pwokeeiawl servi 0.6 18.9 PUBX Fkbllo ScrXce REF PeFko RdtJin 150.7 16.2 15.7 RES Rutamw & Howls 9.2 RUB Rbr Prxducu 49.8 25.3 2D.0 7.7 SWJ SuW 16.9 32.3 2 8.4 9.0 TEX Texdls 26.2 19.4 13.5 14.1 TOO Toboo 52.1 57.3 2.4 TRD Wholeal Retil Tn 10.5 VEG Vgube St AniniJ Oib A Fau 2.9 3.9 8.2 12.1 0.6 VEH Mawv ebka & Equps . 24.6 3D.1 15.1 25.8 WAT Water Tramput _2, . . 3 2S _ _- _ _ _ __ __ _ _ _ _ _ _ 112.8L| 36 WOO, Wood & cork Product 23.0 13.7 1.6 1. -7- economy in 1985. Given that one of the trade policy options that we seek to evaluate is protection uniformity, we were anxious not to bias results by aggregating the model excessively.8 Table I displays the names of each of our sectors along with a 3-letter acronym for later reference. In Table 1 we also list each of the tax instrumenis in the Turkish model. Domestic taxes consist of the value added tax (VAT) and production subsidies.9 Foreign trade taxes consist of import tariffs and export subsidies. The most important instruments from a revenue perspective are tariffs and the VAT. There are no import quotas or voluntary export restraints (VER's) in the Turkey model, reflecting their virtual absence from the economy in 1989, the benchmark year for the tax and trade policies. Using benchmark import and export shares as weights the average import tariff in the model is 8.115% and the average export subsidy 7.399%. These values are substantially lower than prevailed throughout the earlier part of the 1980's. Nonetheless, there is still considerable dispersion in these rates across sectors, which turns out to be crucial for our welfare evaluation of their distortionary effects. 0 The benchmark values of all elasticities in the model are reported in an appendix. Virtually all of the values have been selected from literature searches. 1 'Tere are many elasticities that must be specified here that we do not have (good) data on. Our remedy for this problem, which is endemic to any large-scale model of this kind, s By aggregating even further (at least according to the criteria of value-added) we would tend to bias the model towards showing smaller welfare benefits from uniformity, since benchmark tariffs would be more uniform in the benchmark equilibrium solely as an artifawt of the process of aggregation. One alternative to employing a disaggregated model such as ours, which would reduce aggregation bias, is to use an explicit decision-theoretic metric in selecting sectors to be aggregated, such as advocated by Harrison and Manning 119871. This would involve aggregating tectors with similar levels of protection. Given that the current state of modelling technology does not constrain us to aggregate significantly, we elect not to. 9 The VAT rstes listed in Table I show a great deal of variation across sectors. Patt of the reason is there is some slight statutory difference in the rates. More important, however, is that our rates are derived from observed collections in 1985. the year the VAT was barely introduced. Ther were a great many administrative difficulties in collection procedures, yielding differmnt observed collection rates. Further claboration is provided in appendix B. t° Moreover, just nine sectors account for 79% of the total tariff revenue: CHM (20.7%), ELM (7.3 %), IRN (4.2%). MAC (13.4%), OMI (5.2%), REF (6.1 %), TEX (4.5 %), TOB (3. S%) and VEH (14.1 %). II The elasticity of transformation is set at 2.9 in all sectors and is based on estimates by Faini I19881; it has a standard error of 1.3 in our sensitivity analyses. The primary factor substitution clasticities are based on the regression estimates of Harrison, Jones, Kimbell and wrigle (19911, and have standard errors -s reported ther. They range between 0.293 for refined petrolcum products (REF) up to 3.125 for restaurants and hotels (RES), but the Sf-. majority are close to unity. The elasticity of substitution between domestic and imported goods is based on detailed estimates from the ORANI model of Australia reported in Dixon, Pamenter, Sutton and Vincent (19821 There do exist some estimates on these elasticities for Turkey, reported in Grais, de Mclo and Urats (1986; Table 5, p.7S1, but these were not sufficiently disaggregated for our purposes. The import-source substitution elasticities are set at S on the basis of our priors. Sinilarly, the price elasticity of the Armnington aggregate is likewise set at 2 on the basis of our priors. In addition there is an elasticity of substitution between intcrmediate inputs and value-added in each sector. The tradition, no doubt borne of Input-Output nodelling habits, is to set this elsticity at zero. We do likewise, but also consider values of 0.25, 0.5, 0.75 and I (for each sector) in our sensitivity analysis. Apart from these scctor- specific elasticities. there is one further elasticity reflecting substitutability of consumption in the 'top-level' of our consuners utility function. We assumc a value of I in this instance, again rflecting our priorn and little hard evidence. - 8 - is to undertake syatematic sensitivity analyses of our major results with respect to plausible bounds on these elasticities. Even if we are unable to specify a point estimate with any precision, our priors over the likely bounds that these elasticities could take are quite strong. To the extent that our major conclusions are robust to perturbations over these bounds, we do not see our uncertainty over specific values of these elasticities as a weakness of the model.12 We report the results of these sensitivity analyses, which involve 1000 simulations for each counter- factual policy, in Section, 5. They allow us to conclude that our main results are robust, at least with respect to plausible uncertainty over elasticities. In the present version of the model we only have one private household in Turkey. It is important to note, however, that there are several powerful theorems in international trade theory to show that one can effect Pareto- efficient reforns for multiple households providing there are aggregate (real) income gains and one accepts some weak conditions on pattems of demand and ownership.13 These results do not rely on the availability of lump-sum redistributive taxes, nor do they address the issue of an optimal reform package. What they do show is that one can focus initially on aggregate gains in income and welfare, knowing that the redistributive aspects of the problem do have a solution that leaves each household at least as well off as before the reform. This is not a complete substitute for actually solving for the equity effects of a reform package, but it is a partial substitute.14 The SOE model is generated with the GAMS software developed by Brooke, Kendrick and M.araus ( 19881 and solved with the MPS/GE software developed by Rutherford [1989].'s 12 These remuark should not be interpreted as denying the value of any new erprirical work on generating such elasticities. On the contrary, any effon that could generate better bounds on these point estimates is useful in generating poficy conclusions that carny greater credibility, even if those conclusions will still be probabilistic in nature. 13 See Dixit and Nonnan (1980; pp. 79/801 (19861. The conditions on demand and factor ownership pattems are primnarily to rule out 'pure exchange' economies. These conditions are trivially met in our mnodel. 14 It would be a relatively straightforward matter to extend our model to acconmmodate multiple households if coresponding data were available. 15 The systenatic sensitivity analyses reported in an appendix are undertaken with the MPSS software implementing the procedures developed by Harrison and Vinod [19921. -9- 3. POLICY ANALYSIS We present our results by examining each of four trade policy options currently facing Turkey: uniformity, across-the-board liberalization, sectoral liberalization, and harnonization with the external tariff of the European Communities. 3.1 Uniformity Background A brief overview of the literature of uniformity will assist the interpretation of the results. Import taxes are an inefficient method of generating government revenue because they discriminate between the domestic and imported variety of the product, and therefore distort consumption and production decisions. However, it has been known at least since Ramsey [ 19271 that if one is going to utilize import taxes to generate a given amount of revenue in an economy with only final goods, then that revenue can be generated with the least efficiency cost by imposing tariffs in inverse proportion to the elasticity of import demand. That is, there are strong theoretical reasons why non-uniform tariffs may be optimal. There are a number of problems, however, with implementing Ramsey optimal import taxes. First, when there are intermediate goods included in the economy, or one accounts for cross-price elasticities, an extended Ramsey optimal import tax structure still exists but its computation is empirically complicated. More importantly, practitioners cf trade policy usually recommend tariff uniformity because the observed pattern of import taxation in developing countries often follows political economy considerations, with cascading protection for final goods, rather than Ramsey optimal prescriptions. Regarding non-discriminatory domestic taxes, it has been shown that if all goods are taxable and labor supply is perfectly inelastic, then uniform taxation is optimal for the purpose of raising a given amount of revenue. 16 Since a uniform tax on all goods is equivalent to a tax on labor alone, a uniform tax will minirize 16 See Atkinson and Stiglitz [19801. - 10 - distortion-induced resource movement if labor supply is perfectly inelastic. That is, uniformity is optimal because agents cannot escape the tax by reallocating their production or consumption decisions. Similarly, if labor supply is not perfectly inelastic then it becomes optimal to impose higher taxes on those goods that are better complements with leisure. 17 The tax on the good would include a component that is intended to tax leisure. If there are other goods in the economy that cannot be taxed then the same logic would apply: higher taxes should be applied on those goods that are complements with the aggregate of all goods that are not taxed. As a practical matter there are many goods that are left out of the taxation system, with varying and uncertain complementarities to taxed goods, so it becomes very difficult to determine the optimal non-uniform tax.18 In our model, however, there is no labor-leisure choice and all goods are taxable.19 Therefore we would expect that there should be welfare gains from movements towards uniformity of domestic taxation. The only question reaining, then. is how significant they are quantitatively. 7 Assuming that leisurc cannot bc effectively taxed. 1I To illustrate, consider the simple example posed by Harberger 119901 in which we consider extending a VAT to cover bicycle rpair shops in the formal and hitherto untaxed sector. By taxing this sector we will cause some substitution towards other activities in the taxed sector, as well as some substitution towards other untaxed activities such as the informal bicycle repair sector. (There may also be some sectors whose outputs are net complements to the output of the newly taxed sector, but we can ignore those for present purposes. In general we would expect that the output of the large groups of sectors that we are talking about here, the 'currently taxed sector' and the *remsining untaxed sector', will be relatively large and hence net substitutes with the output of the sector in question.) Welfare goes down due to the loss in consumer surplus from the contraction of the bicycle repair shop, but will go up due to the gain in consumer surpits from the expansion in the other taxed and untaxed sectors. Which effect dominates? The net effect on welfare will depend on the degree of substitutability between the outputs of the newly taxed sector and untaxed sectors. If there are sufriciently strong substitutes in the untaxed sector, such as informal bicycle repair shops or personal leisure (i.e., seif-repair as a hobby), then we would expect that net welfare would fall. The logic behind this conclusion is the same as the Ramsey Rule logic which seeks to raise a given amount of revenue with least deadweight efficiency loss. If adding a distontion of a given amount on the formal bicycle repair sector generates an arbitrarily small increment in revenue because everybody substitutes informal repair services that are completely untaxed, then one must keep increasing the distortion until it is arbitrarily large so as to generate the required increment in revenue. Such large increases in distortions will eventually ensure a welfare loss from the exercise, even if the increment in revenue is redistributed in a lump-sum manner back to households. Hatt& and Haltiwanger (19861 provide a succinct formal demonstration of this result, providing that we re-interpret their lowest-taxed activity as the newly taxed activity of this example. Harberger 11990; p.801 draws out the implications for the practical design of uniform taxation schemes. 19 in the context of international trade and uniform tariff policies, the analogue of 'untaxed activities' is smuggling. To the extent that different goods are easier to smuggle one might find that nominal tariff uniformity will have a non-uniformn distortionary effect (see Panagariya 119901). - 11- Results Our results for Turkey, presented in Figure 1. show that there are indeed considerable benefits from uniformity of incentives in export subsidies and the external regime as a whole. If uniformity is limited to the tariff regime20 then benefits are obtained but they are relatively modest. Nonetheless, the result verifies the intuition of practitioners: the actual pattern of import taxation departs significantly from Ramsey optimal import taxes.21 When uniformity of external incentives is extended to include export subsidies2, the benefits of uniformity increase dramatically and exceed one percent of GDP. This is because there is great dispersion in export subsidy rates, with many sectors receiving no incentive and others receiving large incentives to export (see Table 1). When we add a uniform VAT and production subsidies23 to uniform external taxation we increase the benefits further, consistent with the fact that all goods are taxable and labor supply is perfectly inelastic in our model. We demonstrate in the next section that the principal distortion remaining in the external regime of Turkey is the dispersion of the incentives rather than the level of the incentives. 3.2 Across-the-Board Liberalization Background A number of developing countnes, including Turkey, have progressively liberalized their import regimes. Quantitative restraints are virtually elimunated and tariffs have been lowered, but some export subsidies remain. Often the sectors with high tariffs are the same ones that have high export subsidies. Although these countries stand ready to reduce tariffs further, in such a situation does it enhance welfare to continue to reduce tariffs across-the- board while leaving export subsidies in place? Conversely, would it be beneficial to increase export subsidies as an offset to the anti-export bias of the tariff, as a second-best measure to reducing the tariff? We first consider the 3D The uniform tariff is set at 8.115%, which is the benchmark import-weighted average tariff. It is applied to all sectors, irrespective of their trade status in the benchmark. Vintually identical results obtain if one applies it only to those sectors with benchmnark imports or import tariffs. The same generalization applies to the other unifornity packages considered below. 21 If it did not depart from the Ramsey optimal tax structure then uniformity would, by definition, imply welfare losses. 22 The uniforn level of export subsidies is 7.399%, which is again based on trade-weighted benchmark data. 3 The uniform VAT is 6.520% and the uniform production subsidy is 0.730%. - 12- Welfare Gain as a Percent of GDP 1.414 1.2 1.2 1 1 0.8 0.8 0.6 0.6 0.4 OA 0.2 -0.2 0 0 Tariffs Export Subsidies Foreign Distortons All Distortons Figure 1: Welfare Effects of Uniformity Policies theory and conventional policy advice on this question in the context of the arguments for export subsidies. The classic argument for export subsidies rests on the theoretical foundation of the Leemer [1936] symmetry theorem, which states that a tax on imports is equivalent to a tax on expcrts. It follows that if a two-sector economy has an unremovable import tax in the import competing sector it can offset the resulting anti-export bias with an export subsidy to the exporting sector.' Based largely on this argument, Balassa [1987] argued that for most developing countries an anti-export bias will likely prevail, even after tariff reduction and devaluation, which cails for export promotion measures. Krueger [1984; p.5281 noted that many 'export promotion" measures employed by policy-makers in developing countries are nothing more than partial offsets to the overall bias in the regime toward 2 There are other theoretical justifications for export subsidies that have been less important in the policy debate. For example, a justification for export subidies has been offered by Itoh and Kiyono [19871, who argue that targeted export subsidies to non-taditional export sectors will enhance welfare when additional traditional exports of a country will suffer a tenns-of-trade loss. In addition, strategic trade policy considerations have been used to justify export subsidies, for example by Brander and Spencer [19851 as a method of shifting profits in oligopolistie industries. Eaton and Grossman (19861, however, have shown that the arguments for policy intervention baed on oligopolistic profit shifting are not robust with respect to the specification of oligopolistic interaction. - 13 - import substitution. Large export subsidies, however, generally create problems and are thus typically not recommended. These problems may include budgetary problems for the government and various types of rent- seeking behavior such as falsification of export documents, lobbying to seek higher subsidy rates, and export and re-import to obtain the subsidy.<' Since export subsidies per se in the manufacturing sector are proscribed by the GAIT, those who argue for export subsidies suggest the use of export subsidies that are legal under the GATT. Thus Balassa [1987] has recommended that developing countries rebate import duties and indirect taxes on exports, both to direct and indirect exporters, as well as provide preferential export credit and export insurance in the absence of private insurance. These 'duty drawback' schemes have the effect of automatically linking tariff and tax reform with export subsidy reform. Results Figure 2 displays the welfare effects of reducing tariffs and export subsidies across-the-board. Reductions of tariffs alone cause some welfare gains initial!y, but these deteriorate into a welfare loss for reductions greater than 40%. This welfare loss is attributable to the Lemer synunetry effect discussed above. As the average tariff is only slightly above the average export subsidy, there is only a slight anti-export bias in the external incentives. As tariffs are progressively reduced in a piecemeal manner, the external incentives eventually become biased toward exports. 25 Nogues f 19871 has shown that in Argentiria expost subsidies lead to fraud, corruption and rent-seeking. He concludes that in Latin America the level of import protection has been so donminant that the provision of fully offsetting subsidies would introduce budgetary problems and rent-seeking behavior that would be counterproductive, and is clearly inferior to the first best policy of reducing the imponrt protection. Based on evidence such as this. Thomas, Nash and Associates [19911 have concluded that large expon subsidies are not recommended. - 14 - Welfare Gtdn as a Percent of GDP 1.5 1.6 1.25 12 Tariffsa 0.75 0.75 -4- Export Subsidies 0.5 Foreign Distortions 0.5 C All Distortions 0.25 - - ~~~~~~~~~~~0.25 ma = 0 -0.25 i X ,-{0.26 0 10 20 30 40 60 60 70 80 90 100 Percentage Reduction In Policy Figure 2: Welfare Effects of Across-the-Board Trade Liberalization Figure 2 also displays the welfare effects of reducing export subsidies across-the-board.2 Contrary to the case of tariff reductions, the benefits of export subsidy reductions continue up to a 70% reduction and are much more substantial at about one percent of GDP. The stark contrast in the effects of export subsidy reduction and tariff reduction appears at odds with the Lerner symmetry theorem, since the average tariff and export subsidy are about equal. The puzzle is resolved by recognizing that there is significantly greater dispersion in benchmark export subsidies. As shown above, the Turkish economy would gain about one percent of GDP from uniformity of export subsidies, but less than 2/10 of a percent from tariff uniformity. The process of taking an across-the-board reduction " There has been some debate over the claim that export subsidies in Turkey have an 'anti-agriculure' bias. This claim derives fiom the observation that nominal export subsidies appear to be concentated in manufacturing industries rather than agricultural or food-related sectors. It is a straightforward matter to test this claim by looking at the effects on domestic output when we remove export subsidies. In the benchmark year agricultural industries constituted 23.85 % of Turkish output. 'Agriculture is here defined as consisting of AGR, ANI, FIS, FOR, MEA, OFP, SUG, TOB, and VEG; this definition errs on the side of inclusiveness, but more narrow definitions would not change our conclusions. This value trpands slightly when we just remove export subsidies, and expands even further when we jointly remove expon subsidies and tariffs. We therefore conclude that there is no evidence of any general equilibrium bias against agricultre due to export subsidies. - 15 - in export subsidies has the simultaneous effect of also reducing the dispersion in export subsidies, and it is the reduction in dispersion that is driving the result of Figure 2 for export subsidy reduction. Reducing export subsidies and tariffs jointly leads to even greater welfare gains than just reducing export subsidies. This is again indicative of the offsetting effects of tariffs and export subsidies from the Lerner symmetry theorem: large reductions in tariffs result in welfare losses, whereas the effect of adding the same tariff reductions to reductions in export subsidies is to enhance the welfare gains.27 Removing all domestic and foreign distortions results in further enhancements of welfare, albeit not as large as those due to export subsidy removal. To further bolster our interpretation that the dispersion in the export subsidy regime is the principal cause of the gains from export subsidy reduction, Figure 3 addresses the question of export subsidy and tariff removal again but with the difference that benchmark tariffs and subsidies are set equal to their uniform values. Thus we eliminate the dispersion in each before reducing the level of the policy. In this case the results are much more consistent with the practical rule-of-thumb derived from the Lemer symmetry theorem. Recall that the benchmark average tariff of 8.115 % is slightly higher than the average export subsidy of 7.3-99%, resulting in a slight import-bias in this new benchmark. Any reductions in export subsidies result in welfare losses that persist at the margin because the regime becomes biased further toward imports. There is a very slight welfare gain from reducing tariffs by as much as 30%, with the maximal gain occuring at around the 10% level when imports tariffs just offset export subsidies exactly. There are much larger welfare losses from reductions in tariffs by more than 30%. paralleling the losses obtained from reducing export subsidies alone. The welfare effects of reducing the level of foreign distortions, given that they are both initially uniform and approximately equal, are also negligible. Recall from Figure I that just making foreign distortions uniform results in a welfare gain of 1.2%. 27 For example, consider the 100% reduction in tariffs and subsidies. Reducing tariffa alone by 100% results in a welfare loss of 0. 125 %, whereas reducing expon subsidies alone mults in a welfare gain of 1.004%. The implied effect of their joint reduction would be a welfare gain of ondy 0.879% (- 1.004-0.125) if there were no interaction term and their welfare effects additive. However the welfarf gain from their joint removal is 1. 174%, well above the 1.004% attributable to export subsidy reductions alone. In other words, the welfare pin from the interaction term is 0.295 ( 1.174-0.879) in this instance. It is also usefisl to note that there are weak second-best constaints on the reductions in export subsidies and foreign distonions. In the case of export subsidies the optimal reduction is only 70%, due to other distortions remaining in place. Similarly, reductions in foreign distortions fail to generate welfare gpins at the margin when they reach the 80% level, due to the presence of domestic distortions. Only when all distortions are removed do we find that the optimal policy is to reduce them by 100% as expected since this is the 'first.best' policy. - 16 - Welfare Gain as a Percent of GDP .0 -0.02 - -0.02 -0.04 - -0.04 -0.06 - -0.06 Tariffs + Export Subsidles -0.08 - Foreign Distortions -0.08 0 10 20 30 40 60 60 70 80 90 100 Percentage Reduction In Policy Figure 3: Welfare Effects of Trade Liberalization from Uniform Initial Distortions Uniformity of external incentives yields almost all the benefits achieved by removal of both export subsidies and tariffs. The reason that uniformity yields welfare benefits almost as large as full liberalization is explained by the fact that Turkey starts from a trade regime that is not significantly biased toward import substitution or export promotion. During the 1980's Turkey undertook a significant trade liberalization which left it with a relatively low level of protection but a relatively high level of export subsidies. In other words, in our benchmark equilibrium it has a structure of external incentives that tends to be reutral with respect to either import substitution or export promotion. The principal distortion in the Turkish trade regime is the dispersion in the incentives across industries and not, as is often the case in developing countries, an across-the-board anti-export bias. Ceteris paribus, the more the economy is protected and the greater the anti-export bias, the smaUler will be the proportion of the welfare benefits of liberalization that uniformity will achieve. - 17- We perform some additional expenments to verify this interpretation. We benchmark our model to the tariff rates prevailing in 1985, reported in Table 1. These were about double those applying in 1989, averaging 17.623%. Although this tariff rate is somewhat small compared to rates of nominal protection in many developing countries, it does introduce an anti-export bias into the Turkish external regime. A piecemeal reduction in the 1985 tariff rates to the level of 1989 results in an increase in Turkish welfare of 7/100 of a percent of GDP, and the benefits of uniformity (of all distortions) are reduced from 99.9 percent to 94.1 percent of the benefits of the first-best liberalization. This also shows that the tariff reductions that Turkey undertook in the late 1980's were welfare enhancing. If the external incentive regime were biased toward import substitution, as is common in developing economrues, then piecemeal lowenng of import protection would result in welfare improvement. The important lesson is that when a country has gone as far as Turkey with import liberalization, while at the same time maintaining significant export subsidies, further import liberalization must be balanced with further reductions in export subsidies.28 Similarly, these results provide support for the view that some small export subsidies are efficient if a country starts from an import regime that is significantly protected. To the extent that export or production subsidies in Turkey are effected by means of 'duty drawback' on customs duties on imports or VAT, interaction effects such as we have examined will be built in to any liberalization of those subsidy schemes. In other words, anything that lowers tariffs would endogenously lower export subsidies, generating these beneficial interaction effects. This may well be an unplanned advantage of the use of such drawback schemes. As Turkey turned away from import substitution in the early 1980's, it adopted strong export promotion measures, some of which, as mentioned in the introduction, have been the subject of controversy. We also address this issue by examining whether the Turkish policy of reducing export subsidies during the last half of the 1980's was welfare enhancing. in order to assess whether there were benefits of the export subsidy reduction, we counterfactually scale up all e..port subsidies to levels estimnated to prevail in earlier years in Turkey, and simulate 8 Similar results for the Polish economy are discussed by Tarr [ 19901. It was shown that liberalization of foreign cxchange surender requirements would provide benefits for Poland for a very significant liberalization, but beyond a high level of liberalization Polish welfare would be reduced unless export subsidies were also reduced. - 18 - the effects of the Turkish policy of lowering export subsidies toward the level of 1989. This tilts the extemal incentives toward export promotion, but what is more important, greatly increases the dispersion in the export subsidies. We find that the the policy of export subsidy reduction yields very substantial welfare benefits.29 Finally we note that second-best effects with domestic taxes are apparent, but they are not so important as to offset the benefits of either liberalization or uniformity as reform packages providing they are applied to export subsidies (either jointly with tariffs, or by themselves). The Effect of Altermative Tax Replacements The use of the VAT as a replacement tax makes virtually no difference to our quantitative or qualitative conclusions. The VAT has a relatively small welfare cost for changes in the order of 10% or so, which is the upper bound on most of the policy exercises we consider. Figure 4 displays these weifare changes, using a lump-sum tax to replace foregone revenues. Thus we would not be surprised to see the use of the VAT having little effect relative to the lump-sum replacement tax for reasonably small changes. Unless specified otherwise, this is what we find in all of our policy simulations.30 3.3 Sectoral Liberalization We have seen above that given uniformnity, export subsidies tend to offset the anti-export bias of tariffs even in a multisector framework of the Turkish economy. Krueger [1984; p.528] has noted, however, that policy-makers in developing countries have often used export promotion measures as a device to induce import substitution gWe perform simulations with three new expont subsidy rates of 2.0, 2.62 and 3.4 times the export subsidies of our original benchmark equilibrium. As discussed in appendix B, this corresponds to export subsidies of 14.8, 19.4 and 25.2 percent, which were reported as the export subsidy rates prevailing in Turkey in the years 1988, 1985 and 1986, respectively. As a percent of GDP, the welfare benefits of reducing the export subsidies to the level of our original benchmarkequilibrium are 3.6%, 6.5 % and 12.1%, with the higher welfare benefits corresponding to reduction of the higher xpon subsidies. The we.fare benefits of export subsidy reduction increase more than proponionately to the scalar multiple of the expon subsidy, because the quantity of resources distorted increases with the price distortion of the subsidy and acts multiplicatively on the price distortion in the calculation of the welfare costs. Interestingly, the welfare effects of subsidy reduction are only slightly affected by rebenchmarking with 1985 tariff rates, reflecting the fact that it is dispersion of the export subsidy that is of prinary importance in these results. 30 Although the welfare change from VAT reduction is small, the sign of the welfare change is the opposite of what is expected from first-best policies. This is because VAT rates are often high in those sectors that have high tariffs and export subsidies (we pursue this point below). - 19- Welfare Gain as a Percent of GDP & ~~~~~~~~~~~~~0 -0.05 -0.06 -0.1 - -0 1 -0.15 -0.15 -0.2 - -0.2 -0.25 - -0.25 -0.3 - -0.3 -0.35 -0.3S -0.4 _ , , , , ,-0.4 0 10 20 30 40 60 60 70 80 90 100 Percentage Reduction in VAT Figure 4: Welfare Effects of Reductions in the VAT industries to export part of their output. Krueger notes that this policy is also justified as offsetting the anti-export bias in the regime. Presumably the argument is that the sector is not motivated to export without the export subsidy since it receives a relatively high price on the domestic market due to the import protection. On the contrary, however, an export subsidy to the sector that is also favored by a high tariff will not be an offset. Rather it will exacerbate the resource misallocation problem of too mnany resources in the protected sector. We investigate the impact on the Turkish economy of removing or reducing tariffs or export subsidies, or both, from individual sectors. Given piecemeal policy change in a particular sector, the interaction with the VAT in the sector will become impcrtant. In particular, if a sector enjoys a high tariff and high export subsidy, excessive resource allocation to the sector will be reduced by a high VAT. Table 2 presents a summary of welfare effects of piecemeal reform of individual sectors. In order to compare results across sectors which are significantly different in size, we express welfare gains here as a - 20 - I..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o i -: 8 A 9 40 o 0 ............................................................................. ..... ........... ......................... . . . , _ 8 n a Ia 9| S & ° w .S S F g - U~E - !~~~~~~~~~~~. * ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~0 3 .0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C 1. 0 0 .0~~~~~~i 0 0~~~~~~~~~~~~~~~~~~~~~~~~~L us0 0 C.-o.8 2 0 ~ ~ 0 Table 3: Welfare Effects of Piecemeal Sectoral Reform as a Percent of GDP Cao,I6 R dw1 ?ag5u Rctonm sx T Tsx sx T AGR 0 .0.00084 40.ans4 0 ° B3 ALC 4.00173 0.010399 0.00033 i.0.03 0.0157A ANI 0 .0.001 4.0001 0 40031 APP 40783 4.00426 4.0a36 .0.,:0 0.OD10i CEM 0.00D93 .9.506 0.00901 0.005899 0.o0007 CHI{N 0.003322 4.08 02 002897 133 COL 0 4.0D284 4.00284 0 0 4.0024 COM 4.00141 400.096 00024 .00l3l .041 ELM 0024.15 4.01138 0.013431 , 0.l0l528 4A007 FAB 0.769165 0.008477 0.7671 j 5.69S16 0.00"37 rEs 0 o.00166 0.000166 o.aDC014 A0892 FOR 0 4.000M9 4.00W9 I o 44 FRT 0.002663 4.00105 O.OD1471 0.0L13099 4n001 GLS 0.00028 Q.o0427 o.cco57s 0.01053 0.0019? [RN 0.191486 4.0963 0.13124 0.617817 4.0AM MAC .0.01028 4.00642 40.1541 0.00.5135 0.12W MEA 4.00196 4.00034 4-023 ,0.0S6 4AO=z OFP 4.01864 0.00N69 4.01613 ,4.00962 o.0aSM4 OMP 0 0.00072 4000D72 0 0.0om REF 0 0.000403 0.000403 0 0o8 RUB 0.000104 0.00038 0.009 .O0D692 0.002001 SUG 0.000537 0.000057 0-001614 0.00308 Ono.00S TEXC 4.0048 4O.0D6 4.07915 0.006692 0.0086 TOB 0 0.019122 0029122 0 0.052OMI VEO 4D00736 4.0D224 400976 0.002019 0.oi14 VEHI 4.01273 .01715 4.03066 .4.0754 0.01528 WOO 4-003 4.00538 4.0D776 4.00231 4A061 by a marginal analysis. We do not report the TSX column for the marginal changes since the results would be additive in the two components that are displayed. Given the policy concern mentioned by Krueger, the first result on which we focus is the welfare effects of export subsidy and tariff reduction in those sectors for which both the export subsidies are greater than 15 percent and tariffs are above average. From Table 1, there are six sectors in this group: Chemricals (CHM), Electrical Machinery (ELM), Fabricated Metal Products (FAB), Glass (GLS), Rubber Products (RUB), and Motor Vehicles and Equipment (VEH). We see that for a marginal reduction in export subsidies in all sectors except Motor Vehicles there is a welfare gain. Sirnilarly, for a marginal reduction in tariffs in all sectors except Electrical Machinery there - 22 - is also a welfare gain.31 These results support the view that using high export subsidies in sectors with above average tariffs is counterproductive.32 Theory suggests that the distortion costs of a tariff or subsidy increase more than proportionally with the size of the tariff or subsidy, because the quantity of resources misallocated also increases and acts multiplicatively on the tariff or subsidy in calculating the value of the distortion costs. Thus the benefits of export subsidy reduction are greater at the margin the greater the export subsidy, and the concentration of high export subsidies in a few sectors in Turkey is likely to be a problem for this reason. Examining the three cases of export subsidies above 20 percent, Fabricated Metal Products (FAB), Iron and Steel (IRN), and Electrical Machinery (ELM), there are indeed substantial benefits from a reduction of the export subsidy at the mnargin, even though in the case of Iron and Steel the tariff rate is below average. Thus the evidence for Turkey supports the view that high export subsidies are counterproductive. The same general policy conclusion also holds for those sectors with high tariffs. There are seven sectors with tariffs in excess of 30% (ALC, FIS, GLS, OFP, OMP, SUG and TOB), and inspection of Tables 2 and 3 verifies that the welfare gains from tariff reduction in these sectors are substantial at the margin. There are many sectors for which there are welfare losses from reductions in tariffs, export subsidies, or both, either in terms of marginal or complete liberalization. In addition there are a number of sectors for which marginal liberalization can be beneficial in welfare terms and yet complete liberalization harmful. With respect to export subsidies, examples include Machinery except Electrical (MAC), Meat Processing (MEA), Textiles (TEX), and Vegetable and Animal Oils and Fats (VEG). With respect to tariffs we have MAC again, Other Non-metallic Mineral Production (OMP), TEX again, and VEH. These results are explained by the fact that after some point further reduction of tariffs or export subsidies results in a bias in incentives against the sector given that tariffs and exports subsidies remnain in place in the rest of the economy. 31 Motor Vehicles experienced the highest VAT rate in the economy at 25.8%. so export subsidies are offseting the impact of too little resources in Motor Vehicles due to the VAT. In Electrical Machinery, there is also an above average VAT rate; moreover, the tariff rate, which is close to the averagc rate in the benchmark, is also playing an offseting role to the VAT at the margin. 32 These results are based only on Harberger triangle-type distortion costs. Including considerations of rent-seeking, as mentioned above, would strengthen the argument against high expon subsidies. - 23 - It is also inteesting to note that the relationship between these sector-by-sector results and the earlier across-the-board results. Taking simple sumns of the welfare gains in Table 3 indicates aggregate gains of 0.8% from removing export subsidies, minus 0.14% from removing tariffs, 0.7% from removing foreign distortions, 6.5% from marginally reducing export subsidies, and 0.05% from marginally reducing tariffs. The first three of these numbers compare with the actual welfare gains of across-the-board reform of 1.0%, minus 0.12%, and 1.2%, respectively. This indicates that there are significant interaction effects from liberalizing foreign distortions on a multi-sectoral basis rather than implied by the sum of the individual sectoral reforms: the welfare gain is roughly doubled. 3.4 Harmonization with the European Communities Background Turkey has long held aspirations of becoming a member of the EC. As part of negotiations with the EC on this matter Turkey has adopted a policy of harmonizing it's tariff structure with the Common External Tariff (CET) of the EC. There has been some dispute as to exactly what this means, however. Turkey's 'effective (nominal) tariff consists of several components, as discussed in Appendix B. First there is a statutory customs duty. Then there are a series of import surcharges, such as stamp taxes and wharf charges. The customs duty varies across sectors, but the surcharges are generally unif,orm. We refer to the sum of customs duty and these surcharges as the 'total duty' to be applied to dutiable imports. However, Turkey exempts a significant portion of imports from duties through a number of mechanisms including 'duty drawback" and the investment code. The imr.mediate result of these exemptions for our purposes is that the share of imports that is dutiable varies greatly across sectors. Hence the effective (nominal) tariff is the product of the total duty and the share of imports that is dutiable in each sector. It is this effective duty which is the best measure of the nominal protection that the sector is receiving. These distinctions become crucial when one attempts to implement a political commitment to "harmonize the tariff structure". Turkey initially interpreted harmonization to mean that it would levy a zero customn duty on imports from the EC but continue to levy certain of the import surcharges on those imports, albeit at A; reduced rate. -24- According to this interpretation of harmonization the customs dwy on non-EC imports would be set equal to the CET of the EC, and all import surcharges on non-EC imports would apply as before. The net effect of this interpretation, as far as the EC was concerned, was that it would face positive tariffs on exports to Turkey when it might have expected 'harmonization" to mean that it would be allowed to import duty- free into Turkey. After negotiation with the EC, Turkey has considered revising the harmonization policy to accord better with the EC's initial expectations. According to this view all surcharges would be incorporated into the customs duty, and only this single total tariff would apply to imports. Then the total tariff on EC imports would be zero, and would be equal to the CET on non-EC imports. Assuming the continued use in Turkey of exemptions from import duties, the effective (nominal) tariff on non-EC imports would be lower than the CET which the EC applies on those imports itself. That is, after harmonization Turkey would be applying lower average tariffs than the EC. One can .'uagine that negotiations on this matter are continuing. Results Given the political importance of this trade policy alternative we have considered the effects of each interpretation. With either interpretation of the CET, and VAT as the replacement tax, the change is welfare from CET harmonization is small. With Turkey's interpretation of the CET, Turkey's welfare would increase by 7/1000 of one percent of GDP. With the EC's interpretation of the CET, Turkey's welfare would be reduced by 24/1000 of one percent of GDP. What explains these results? CET harmnonization reduces Turkey's average tariff. For small reductions in the tariff, such as implied by the Turkish version of harnonization, there is a slight gain in welfare. As explained above, further uncoordinated reductions in the tariff level from the already low level eventually result ir. welfare losses. Thus, although the difference is slight, the EC version of harmonization results in a loss simply because the tariff reduction is larger. -25 - On the other hand, by combining CET harmonization with removal of export subsidies Turkey can expect to obtain significant welfare gains from EC tariff harmonization. This result follows from our analysis of the joint effects of removing tariffs and export subsidies in Figure 2, along with our interpretation of CET harmonization as a defacto across-the-board reduction in tarffs. Irrespective of the final policy package, our main policy lesson here is that the welfare effects of quibbling over the proper interpretation of CET harmonization are in the second-order of smalls. This conclusion is particularly true in relation to the foregone benefits of more substantial liberalization or uniformity packages. 5. SENSITIITY ANALYSIS How robust are our major policy conclusions to the many assumptions of our numerical model? We answer this question partially by considenng a systematic sensitivity analysis of the main results with respect to all of the elasticities of the model.33 Our sensitivity analysis emplovs the procedures developed by Harrison and Vinod [ 1992]. Essentially these procedures amount to a Monte Carlo simulation exercise in which a wide range of elasticities are independently and simultaneously perturbed from their benchmark values. These perturbations follow prescribed distributions, such as a t distribution with a specified standard deviation and degrees of freedom, or a uniform distribution over a specified range.34 For each Monte Carlo run we solve the counter-factual policy with the selected set of elasticities. This process is repeated until we arrive at the desired sample size, in our case 1000. The results are then tabulated as a distribution, with equal weight being given (by construction) to each Monte Carlo run. The upshot is a probability distribution defined over the endogenous variables of interest. In our case we focus solely on the welfare impacts of each policy. 33 We appreciate that there are many other assumptions that remain fixed as we just vary elasticities, but regard those extensions as beyond the scope of the present study. For example, an important question is how our results might change as we examinse alternative market structure assumptions, or move from a static framework to a growth setting. We plan to examine these extensions using the SOE model. but do not believe that they can be appropnately treated briefly enough to include here. 34 The exact distributional assumptions used are documented in Appendix C (available on request). The MPSS software used to implement the Monte Carlo simulations as documented in Harrison (19901. - 26 - UT ... set tariffs equal to a uniform value of 8. 115% for all sectors. USX ... see expon subsidies equal to a uniformn value of 7.399% for all sectors. UFD ... set all foreign trade distortions (tariffs & expoll subsidies) equal to their average benchmark values. U ... set all domestic and foreign distortioas equal to their average benchmark value. LTAR ... liberalize tariffs by setting them to zero across-the-board. LSX ... liberalize export subsidies by setting them to zero across-the-board. LSX20 ... liberalize export subsidies by 20% across-the-board. LFD ... liberalize foreign trade distortions by setting them to zero acros-the-board. LALL ... liberalize all distortions by setting them to zero: the 'first-best' policy. ULT ... set tariffs and export subsidies to their uniform values, and then liberalize tariffs. ULSX ... set tariffs and export subsidies to their uniformn values, and then liberalize expont subsidies. LVAT ... liberalize the VAT by setting it to zero across-the-board. Note: all simulations use a lump-sum replacement tax. Figure 5: Description of the Policy Simulattons Subject to Sensitivity Analysis The policies that we examine are described in Figure 5, and the results of the sensitivity analysis are reported in Table 4. In the interests of reporting all of the pertinent data in a compact manner, some of the column and row headings are necessarily somewhat cryptic at first glance. The acronyms for each simulation are defined in Figure 5. The 'Sample Size' column refers to the number of Monte Carlo runs that were actually completed. In each case we have at least 1000 runs, which should be enough to obtain a reliable picture of the distribution of results. The 'Point Estimate' column shows the welfare effect of the policy when all elasticities are set equal to their benchmnark, or point estimate (PE), values. These are the results reported and discussed earlier. We report the change in welfare due to the policy as a percent of GDP, just as before. The remaining columns report the results of the sensitivity analysis proper. We list the mean, the median, and the standard deviation, so as to provide simple indicators of the location and dispersion of the distribution of welfare results. We do not report here the skewness and kurtosis statistics that are necessary to gain a more complete impression of the distribution. In all cases we find that there is indeed significant skewness in the distribution, but insignificant kurtosis. The skewness in these distributions manifests itself in there being a systematic difference between the mean and median reported. Thus by comparing these two statistics one can see the direction 27 - Table 4: Results of the Sensitivity Analysis Sanob PotiS S.odU Pnmb. Prb. 50% L.. 50% Upe 7 Lot 75% tpe SMIMti, Sloet E.Amut, M,. Med Dovicc 2t 0 a PE rBet Bo sto UTr 000 0.161 0.21 0.21 003 1.00 0.97 0.19 0.23 0.18 USX 1000 I,073 0.841 0.86 0.114 1.00 O.O 0.71 0.93 0.65 0.96 UFD 2662 I.13 n .IOD5 1.034 0.118 1.00 0.03 0.87 1.09 0.80 1.12 U 1041 L3 1.301 1 307 0.139 LO 033 1.20 1.40 1.11 1A6 LTAR Io0o 40.125 -0.211 0.101 0.01 0.22 4.31 4.14 4.36 .010 0.218 LSX 1000 1004 0.84 0.875 0.117 1.00 00.3 0.70 o.93 0.65 0.96 LSX20 I000 0.84 0.7 0782 0.129 1.00 0.38 0.o7 0.85 052 037 LFD tooo 1174 1.003 1.030 0.122 100 0.04 0.86 1.09 0.0 1.12 LAlL IOO n 1.374 I299 LW08 0.144 1.00 0.34 1.18 1.40 1.10 1,46 ULT low 4.058 4.0172 0.033 0.0 0.0 .0.19 .0.13 .0.20 4.12 0.167 _ . ULMX ( 10 4i . 4.0050 0.02 0.001 0.9SO 4.066 4.0314 40.074 -0.02$ 0 .50 . LVAT 10O0 4.342 . 4_ 00 03 1.X .017 0.00 .0.21 0.0 0.097 of the skewness directly.35 In order to obtain an indication of the qualitative policy results we report the 'Prob. 2 oa column, which shows the probability from the empirical c'istribution that welfare increased in the counter-factual policy. This gives us a measure of the confidence that we have the sign right when we look at the Point Estimate welfare effect or the Mean or Median. Similarly, we report a column showing the probability that a welfare effect greater than or equal 35 Why do we get such significant skewness in the distributions? There are two general reasons why this right occur: induced skewress due to our explicit distributional assumptions. and intrinsic skewness in the (implicit) function linking the set of elasticities and welfare. Each can be evaluated. The explicit assumptions made in our sensitivity analysis result in a large number of skewed distributions for production activities that have benchmnark Leontief technologies. The class of activities that fall into this category are those activities combining intermnediate inputs and value added. In this case we allow perturbations of 0.5 and 1.0, as well as the benchmark value of zero. To see if thiS is the source of the skewness we can just remove these penurbations for these activities and te-run the sensitivity analysis to see if the skewness disappears. We have done this for the USX policy simulation (making all export subsidies uniform), and find that it does not account for the skewness. The other possible reason for skewed results is more subtle than there being skewed distributional assumptions, but could wen be more important. This has to do with the 'asymmetry' of the implicit ficwon that takes a given set of elasticities and generates the welfare effect. It is perfectly possible that equi-sized penurbations of a given elasticity can have different absolute effects on welfare. For example, the elasticity of substitution between domestically produced and imponed goods in our Armington aggregate is set at 2 in the benchmark. We allow equal increases and decreases in this elasticity in our sensitivity analysis. However, it is plausible that increasing this elasticity to 3 from 2 has very little impact on welfare, whereas reducing it from 2 to I has a large impact. The source of our priors on this is no more than visual and casual inspection of isoquants with the relevant elasticities of substitution: once the elasticity gets above 2 it stays 'pretty flat', but dropping it down to I adds 'significant curvature'. We can evaluate this source of skewness with respect to blocks of elasticities of the same type by just sening those elasticities equal to their PE value. We do this for the USX policy simulation, and with respect to each elasticity block. No single block can account for the skewness. We conclude that there is no single block of elasticities that is causing this skewness. - 28 - to the PE welfare effect was obtained. If the PE result is perfectly representative of the location of the distribution of results we should see this value around one-half; this would be the case if the PE result exactly equalled the reported Median result. A value l,wer (higher) than one-half indicates that the distribution generally lies below (above) the PE resul,. Finally, to gain a better sense of the confidence to be attached to the PE or Mean result, we report lower and upper bounds from 50% and 75% symmetric confidence intervals around the Median result. These confidence intervals simply show the smallest and largest values that lie within 50% or 75% of the distribution centered on the Median. Thus a 50% confidence interval between 1.1 and 2.3 can be interpreted as saying that 50% of the Monte Carlo runs resulted in welfare results between these values. What, then, do we learn from these sensitivity analyses regarding our policy conclusions. Six observations may be made. First, the welfare gains from the first-best liberalization policy (LALL) are robust to uncertainty over elasticities. The median and PE estimnates are each of the same order of magnitude, around 1.39%. Second. the welfare gains from refonn of export subsidies are not as large as they were with the PE elasticities. This applies to the policy of uniformity (USX) as well as liberalization (LSX). In each case the welfare gains drop to around 0.87% rather than the initial results of 1.0% or so when PE elasticities are used. It is noteworthy, however, that just reducing export subsidies by 20% (LSX20) continues to generate a relatively large fraction of the welfare gains from the complete liberalization of export subsidies. Given the decline in welfare gains due to the USX and LSX policies, this fraction is therefore even larger than before. This confirms the policy conclusion as to the importance of having the highest export subsidies reduced, at the very least. Third, there continues to be a welfare loss from unilateral libemlization of tariffs (LTAR). This loss increases from 0.1% of GDP to around 0.2% when we allow for uncertainty over elasticities. Fourth, the welfare gains from moving towards uniformity of foreign distortions (UFD) or all distortions (U) appear to very robust. Fifth, the welfare losses obtained when tariffs or export subsidies were liberalized from a benchmark in which all foreign distortions were uniform (ULT and ULSX, respectively) are qualitatively robust. The welfare loss - 29 - in the case of tariff liberalization is somewhat larger than before, strengthening our earlier policy conclusion in this respect. Finally, the welfare effects of removing the VAT with a lump-sum replacement (LVAT) are even 'more neutral" then before. Rather than a welfare loss of 0.342%, we now find a median welfare loss of only 0.09% with a standard deviation of approximately the same value. This confirms the earlier finding that the existing VAT serves well as a practical alternative to the lump-sum tax as a distortion-free replacement tax. 6. CONCLUSIONS The first important policy conclusion concerns the fragility of the rule-of-thumb that holds that small export subsidies may be welfare enhancing as an offset to existing import tariffs. We find that this rule-of-thumb applies when one assumes uniform tariffs and export subsidies across sectors, but that it is unreliable as a rule when applied across-the-board to sectorally dispersed trade distortions or for sector-specific reform. The rule is rehabilitated, then, when a country has managed to reduce the anti-export bias of the trade regime and has a relatively uniform set of trade distortions. This set of circumstances may characterize an increasing number of countries that have been following a path of trade liberalization in recent decades. In such cases one must be wary about advocating the reform of tariffs or export subsidies alone. A further important conclusion from our examnination is that tariff and export subsidy uniformity yields substantial benefits in welfare terms in Turkey. Although 'Ramsey' optimal import taxation would call for non- uniforrn import taxation inversely proportional to the elasticity of import derand in each sector, the observed dispersion of the tariff structure in Turkey is inconsistent with optimal departures from uniform protection. In fact, in the case of Turkey uniformity achieves an extremely high proportion of the benefits of full trade liberalization. This result is explained primarily by the substantial trade liberalization Turkey has undertaken during the decade of the 1980's. Given its export subsidies and low level of protection, the trade regime no longer has an anti-export bias. Rather the principal distortion remnaining in the trade regime derives from the dispersion of the tariff and export subsidy structure. - 30 - Another important policy conclusion that we draw is that the harmonization strategy is significantly inferior to any of the other strategies. This result follows simply from the fact that harmonization to EC tariffs will require a lowering of Turkish tariffs from already low levels, in the presence of export subsidies almost as large as the existing average effective tariff rate. Unilateral tariff elimination in the presence of export subsidies results in a second-best distortion. The export subsidies become the dominant distortion in the trade regime, and the economy becomes too export oriented. We argue, however, that harmonization to the EC tariff structure can be a welfare enhancing policy if accompanied by a policy of removing or reducing export subsidies. The important policy lesson for Turkey from this exercise is that if it intends to proceed with harmonization to the CET of the EC then it is important to accompany that policy with a reduction in export subsidies. Summarizing, the most important policy conclusion from our analysis concems the fragility of first-best rules-of-thumb as to the welfare benefits of piecemeal trade policy reforms. In other words, it is not the case that any partial movement towards the first-best trade policy for Turkey will result in some fraction of the welfare gains from that first-best package. Of course this is nothing but a restatement of well-known second-best results. What is new, however, is an attempt to assess the quantitative significance of these effects for a Turkey and we are able to gain some insights into which particular distortions have more or less severe second-best effects. - 31 - REFERENCES Arslan, Ismail, and van Wijnbergen, Sweder, 'Turkey: Export Miracle or Accounting Trick?" PRE Working Paper Number 370, mimeo, 1990. Atkinson, Anthony, and Stiglitz, Joseph, Public Economics (New York: MacGraw Hill, 1980). Balassa, Bela, 'Subsidies and Countervailing Measures: Economic Considerations", in Bela Balassa (ed.) Subsidies and Countervailing Measures: Critical Issues in the Uruguay Round, World Bank Discussion Paper 55 (Washington D.C.: The World Bank, 1989). Balassa, Bela, 'Tariff Policy and Taxation in Developing Countries", PRE Working Paper No. 281, World Bank, September 1989. Baysan, Tercan, 'Some Economic Aspects of Turkey's Accession to the EC: Resource Shifts, Comparative Advantage, and Static Gains', Journal of Common Market Studies, v.23, 1984, 15-34. Baysan, Tercan and Blitzer. Charles, 'Turkey's Trade Liberalization in the 1980s and Prospects for its Sustainability," Unpublished Manuscript, Presented at the Conference on Turkey's Economic Development in the 1980s, Harvard University, mimeo, 1988. Baysan, Tercan and Blitzer, Charles, "The Timing and Sequencing of a Trade Liberalization: The Case of Turkey", in D. Papageorgieu, M. Michaely and A. Chokski (eds.) Liberalizing Foreign Trade, v.6 (Cambridge MA and Oxford: Blackwell, 1991). Brander, James, and Spencer, Barbara, "Export Subsidies and International Market Share and Rivalry", Journal of International Economics, v. 18, 1985, 83-100. Brooke, Anthony; Kendrick, David, and Meeraus, Alexander, GAMS: A User's Guide (Redwood City, CA: The Scientific Press, 1988). Dixit, Avinash K., and Norman, Victor, T7heory of International Trade (Welwyn, UK: Nisbet, 1980). Dixit, Avinash K., and Norman, Victor, "Gains From Trade Without Lump-Sum Compensation", Journal of International Economics, v.21, 1986, 111-122. Dixon, Peter B.; Parmenter, Brian R.; Sutton, John, and Vincent, David P., ORAN7: A Multisectoral Model of the Australian Economy (Amsterdam: North-Holland, 1982). Eaton, J., and Grossman, Gene, 'Optimal Trade and Industrial Policy Under Oligopoly", Quarterly Journal of Economics, v.101, 1986, 383-406. Faini, Ricardo, "Elasticities of Supply: Some Estimates for Morocco and Turkey", Mimeo, Trade Policy Division, Country Economics Department, World Bank, 1988. Foroutan, Faezeh, 'Foreign Trade and Its Relation to Competition and Productivity in Turkish Industry", Working Paper No. 604, Trade Policy Division, Country Economics Department, PRE, World Bank, Febnuary 1991. - 32 - Grais, Wafik; Melo, Jaime de, and Urata, Shujiro, 'A General Equilibrium Estimation of the Effects of Reductions in Tariffs and Quantitative Restrictions in Turkey in 1978", in T.N. Srinivasan and J. Whalley (eds.), General Equilibrium Trade Policy Modeling (Cambridge, MA: MIT Press, 1986). Harberger, Arnold C., 'Reflections on Uniform Taxation", in R.W. Jones and A.O. Krueger (eds.), The Political Economy of International Trade (Cambridge, MA: Blackwell, 1990). Harrison, Glenn W., 'The Sensitivity Analysis of Applied General Equilibrium Models with MPSS: Users Guide", Unpublished Manuscript, Department of Economics, University of South Carolina, June 1990. Harrison, Glenn W.; Jones, Richard; Kimbell, Larry J., and Wigle, Randall, 'How Robust Is ApplUed General Equilibrium Modelling?", Journal of Policy Modelling, v. 14, 1992 forthcoming. Harrison, Glenn W., and Manning, Richard J., 'Best Approximate Aggregation of Input-Output Systems", Journal of the American Statistical Association, v.82, December 1987, 1027-1031. Harrison, Glenn W.; Rutherford. Thomas F., and Wooton, Ian, 'An Empirical Database for a General Equilibrium Model of the European Communities", Empirical Economics, v.16, 1991, 95-120. Harrison, Glenn W., and Vinod, H.D., "Te Sensitivity Analysis of Applied General Equilibrium Models: Completely Randomized Factorial Sampling Designs", The Review of Economics and Statistics, v.79, 1992 forthcoming. Hatta, Tatsuo, and Haltiwanger, John, "Tax Reform and Strong Substitutes", International Economic Review, v.27, June 1986, 303-315. Itoh, Motoshige, and Kiyone, Kazuharu, "Welfare-Enhancing Export Subsidies", Journal of Political Economy, v.95, 1987, 115-137. Krueger, Anne, "Trade Policies in Developing Countries", in R. Jones and P. Kenen (eds.) Handbook of International Economics (Amsterdam: North Holland, 1984). Lemer, Abba, "The Symmetry Between Import and Export Taxes", Economica, v.3, 1936, 306-313. Milanovic, Branco, "Export Incentives and Turkish Manufactured Exports," World Bank Working Paper Number 768, 1986. Melo, Jaime de, and Tarr, David, General Equilibrium Analysis of U.S. Foreign Trade Policy (Cambridge Mass.: MIT Press, 1992). Nogues, Julio, "The Experience of Latin America with Export Subsidies", WeltwirtschaftlichesArchiv, v.126, 1990, 97-114. Panagariya, Arvind, "How Should Tariffs be Structured?", PRE Working Paper No. 353, World Bank, 1990. Ramsey, Frank P., "A Contribution to the Theory of Taxation", Economic Journal, v.37, 1927, 47-61. Rodrik, Dani, "Some Policy Dilenmmas in Turkish Macroeconomic Management," in T. Aricanly and D. Rodrik (eds.), Turkey's Economic Development in the 1980s: Changing Strategies for the Next Decade (New York: MacMillan, 1988a). - 33 - Rodrik, Dani, "Imperfect Competition, Scale Economies and Trade Policy in Developing Countries,' in R. Baldwin (ed.), Trade Policy Issues and Empirical Analysis (Chicago: University of Chicago Press, 1988b. Rutherford, Thomas F., "General Equilibrium Modelling With MPS/GE", Unpublished Monograph, Department of Economics, University of Western Ontario, April 1989. Stern, Nicholas, 'The Theory of Optimal Commodity and Income Taxation: An Introduction", in D. Newberry and N. Stem (eds.), The Theory of TaxationforDeveloping Counties (Oxford: Oxford University Press, 1987). Tarr, David, 'Second-Best Foreign Exchange Policy in the Presence of Domestic Price Controls and Export Subsidies", The World Bank Economic Review, v.4, 1990, 175-193. Thomac, Vinod; Nash, John, and Associates, Best Practices in Trade PoIJcy Reformn (Oxford: Oxford University Press for the World Bank, 1991). disk 14\soe2.doc - 34 - APPENDIX A: ALGEBRAIC FORMULATION OF THE MODEL The model is formulated as a system of nonlinear equations corresponding to the three classes of equilibrium conditions associated with an Arrow-Debreu general equilibrium: price-coet relations for producers, supply-demand balance for commodity and factor markets (including balance of payments), and income- expenditure balance for domestic consumers and government. In SOE these models are generated using the GAMS programming language and solved using the modified Newton (SLCP) algorithm due to Mathiesen 11985]. In this framework a central set of variables (prices, activity levels and income levels) characterize the economic equilibrium. The version of the SOE model described here includes allowance for non- constant returns to scale and non-competitive pricing. These features are not used in the present study, but are documented here for completeness. All important notation is summarized in Figure Al. Technology, Preferences and Market Clearance Conditions Domestic production is an aggregate of domestic and exported varieties with a constant elasticity of transformation: Y= t 1D,,XI) = (aD0DoeI)° + axX''-l)ieI(e-I) (1) This relationship can be interpreted as implying differences in the technical processes associated with production for domestic and export markets. The elasticity of transformation defined by ei will be lower for goods which are highly differentiated and higher for goods which are relatively homogeneous. The specification of this elasticity may be influenced by the intended time frame of the analysis. In the short-run it is more difficult to transform plants between domestic and export oriented products. Imports from different trading partners trade off with domestic varieties in intermediate demand, investment demand and final demand. For simplicity (and due to limitations of data) we assume that the import composition and import- A-1 Variables X. Export of good i. D, Domestic sales of good 1. Ht Composite ininort of good i. mO Import of good i from region r. St Armington aggregate of domestic supply and imports. C1 Private consumer demand for good i. W Welfare index for the representative domestic consumer. LI Labor inputs to sector i. Kg Capital inputs to sector 1. xIV Intermediate inputs of good k in sector i. f Variable input of primary k in sector i. Aj Fixed input of primary k in sector i. Y, Domestic production of good L. pi Price of domestic produced good i. if1 Price of domestic-import good i composite. wk Factor prices k. TT Replacement tax multiplier on lump-sum transfers. -r' Replacement tax multiplier for factor taxes. T Replacement tax multipliers for tariffs. Export price of good i (exogenous). Import price of good i from region r(exogenous). Parameters GI Government demand for good i from region. t,, Import tariff rate on commodity X from region r. sP Rate of production subsidy for good i. s4 Export subsidy rate for good i. JVI Tax rate on factor inputs to sector i. T Lump-sum tax on consumers. B Current account balance (net capital inflows). au Intermediate input requirements, good i in sector j. Fk Primary factor supplies. Figure Al: Notation domestic substitution possibilities in investment, intermediate and final demand are identical. Under these conditions we can represent inputs as though they were composed of a single import-domestic aggregate for each commodity. The aggregation of domestic and imported varieties is characterized by a nested constant-elasticity function of domestic and imported goods: S, Z 4,(D,M,) = c(l D,a 9)1O + crg/' mriy. (2) where M, represents a composite import from two or more regions r: Ml a (E , mi r The market clearance condition for domestic supply balances output from the Armington aggregation function with intermediate, investment and final demand. This condition is: A-2 Si - } a1,Y, + a, + I, + C1 (3) in which YJ is the activity level of sector j, au is the input requirements of good i in sector j, and G,, 1, and C, are components of final demand associated with government, investment and final consumption. Variable inputs to production include primary factors as well as intermediate inputs of commodities. These are combined in a linearly homogeneous nested Leontief-CES form: x,, x~ x-,VI (f,) + (4)F Y, = mir" a t t a4) where In this equation x, represents intermediate inputs of good k in sector i, f is the variable input of primary fact^r k in sector i, V,() represents the value- added function for variable factors, f, represents primary factor inputs to variable cost in sector i, and fF represents the input of factor k to the formation of fixed costs in sector i. Domestic welfare is defined by consumption levels of market goods: w=u (cl, .. *''C (5 The current account is balanced at international prices (pf and PM), taking into account exogenous capital flows (B): L,p,X, + B =, p.mi,, (6) The prices which appear in this equation are exogenous parameters, the international prices of imports and exports. This constraint has an associated variable which is the "real exchange rate'. The model, however, contains no monetary instruments and determines only relative prices. Factor markets always clear with flexible prices: ,f - fl'F =E -Wk (7) A-3 These only appear for sectors in which there are increasing returns to scale. The factor composition of fixed costs is identical to that of variable costs. Income-Expenditure Balance Consumer income includes primary factor earnings plus foreign capital inflows less transfers. Final demand is modelled by budget-constrained utility maximization by a representative agent. The budget constraint is written: , iTC, = Lw,E. + B - TTT (8) In this equation wk represents the market price of primary factor k, B represents the foreign exchange balance and Tr T represents the level of 1"- -sum transfer. Unlike private households, government demands are held constant in all simulations. The government budget constraint is accommodated through endogenous scaling of one of the three government tax instruments so that revenue balances with expenditure. Government income consists of five components: (i) lumpsum transfers from households (T), (ii) import tariffs (ta), (iii) value-added taxes on factor inputs to production (P), (iv) less production subsidies (s,), (v) less export subsidies (sx). The government budget is: £, n G, = r, T + T, M gt,m,+r v if (9) -,sip ( pi Di + px X, )- sx p Xxi In the government budget equation parameters which endogenously adjust to balance income and expenditure are: rT for lumpsum transfers, T, for tariffs, and r, for value-added taxes. In any given equilibrium only one of these parameters departs from the default value of unity. Price-Cost Balance in Competitive Harkets When technology exhibits constant returns to scale producers price at marginal cost. In production the marginal cost of supply for sector i (c,) is defined by: c, Y, = r1TJxf, + (l,r,v,) Lh wkfn (10) A-4 The competitive market structure with constant returns to scale technology and no barriers to entry drives excess profits to zero. Producers then equate marginal cost with market price gross of subsidy, providing the following zero profit condition: (l.-sf) (piDi + pf Xi) 4 pfX1ss = clY1 (11) In this equation the first term represents the value of output gross of production subsidy, and the second term captures the effect of the export subsidy. The import aggregation always equates price with marginal cost. This means that the value of domestic supply equals the cost of domestic inputs plus imports gross of tariffs and rents: 7, prD + ,(l+1r,t,7) p1l mfr (12) Monopolistic Competition The competitive equilibrium which follows from free entry and constant returns to scale is incompatible with increasing returns technology. When production involves both fixed and variable costs some alternative to the competitive paradigm must be considered. We consider two market structures, both of which are consistent with IRS: free-entry monopolistic competition, and average cost (Ramsey) pricing. In free entry monopolistic competition domestic producers set output price sc that marginal revenue equals marginal cost, taking into account the effect of their output on the domestic price level. The number of firms in a given market is determined by the break-even condition, so that in equilibrium the total value of markup revenues exactly balances fixed costs of production. As the economic environment changes, increasing or decreasing markup revenue, the net (long-run) impact is not to change profit but rather to increase or decrease the number of active firms in the industry. The following features of the model structure are important determinants of the nature of competition in the domestic market: domestic and imported varieties are imperfect substitutes; domestic varieties may be differentiated; and A-5 * demand for the import-domestic aggregate is price-responsive. In this section we derive the pricing rules followed by domestic producers in this environment. We begin by presuming that demand for the import-domestic aggregate is represented by the following function: A(pA) 7 p (13) The Armington aggregate is formed through a constant elasticity aggregation of domestic and imported inputs A = ~(a("') D(I-')/1 + aXl/7 M(w/ ) a ' (D, M) in which D domestic aggregate represents a constant elasticity aggregate of varieties from each of N domestic firms g(q) (15) and X is a similar aggregate of imported goods with price index pu. Let pA and PD denote prices of the A and D aggregates, and let p, denote the price of domestic variety i. A is formed through cost minimization: PA = mi PD( D) +p(.) s.t. (16) f ( D, A) = 1 The price index of the domestic aggregate, PDT is formed in an analogous fashion, PD = P/ia I (q) = 1). The Armington and domestic cost functions have the following associated demand functions: D(P,AA) = aD D&i A and q, pOP) D D I Demand for the domestic-import aggregate arises from four sources: intermediate inputs, government, investment and households. The resulting demand function therefore depends on a number of factors including factor prices to the extent that they affect income. In this section we derive pricing rules assuming a given demand elasticity equal to the benchmark value of p, as though it were an exogenous parameter. A-6 Both of these functions may be inverted to express price as a function of quantity. The domestic producer chooses an output quantity q, which maximizes profit: ri(V) -pig,-C (qi (17) where C(Q) = F + cq, is the cost function representing both fixed and variable components. Marginal cost is constant at fixed factor prices. Due to general equilibrium effects, however, the cost function will be increasing with output. The familiar first-order condition equates marginal cost with marginal revenue: ,p, q = CP(18) This can be rewritten to derive an expression for the selling price as a markup marginal cost: p,= (1+m) c, where the markup rate m depends on the perceived elasticity of demand. That is, ml = - (1 + es)' where e, = _ p api q1 The derivation of e, depends on the producer's anticipation of other domestic producers as well as imports. To compute e, we begin with the inverse demand function, p,(qj,pDpD), and apply the chain rule: aP a |iF = -1 = 1 pi + l P,aD + Pi PD (19) E~~~~~1 Ei i 8g D 5 . Drq Under Cournot conjectures the term - is computed holding q, fixed for ji: aq, and the term aPD is computed by applying the chain rule a second time: 8P D = 8PD dD (21) Combining, we have: A-7 aP, q, I qD J + ql[VD, aPD (22) 'J- pg n 7 D y D q, J ;D Making the substitution we have: D PD _1 + 1 p0D + P D I ' (23) e, TD j D PD5J We assume Cournot behaviour by domestic producers while at the same time assuming that producers regard imports as infinitely elastic at the world price (as consistent with our small open economy assumption). In this case: aD PD = a + OD (,j -O) (24) D D where 0e_ P=DD_pM is the domestic value share in the Armington aggregate. As a check notice that as OD - 1, - -a PD _ A, the price elasticity of demand for A. aPD D5 With symmetric domestic firms - = 1, so the perceived elasticity can be written as:2 ef ;PX Q 1+UD/ ° 7] (25) Average Cost Pricing Equilibria 2 If on the other hand import quantities are fixed, as might be the case with import quotas, we apply an alternative formulae: APDD ° I ° OD and: I--I-+ OD-- e, 7 [ hl]N [l uJ N A-8 In order to identify the effect of monopolistic pricing on results we have formulated an alternative to Cournot pricing and monopolistic competition in IRS sectors. Our "contestable markets" model is formulated as though there is a single firm in the industry which prices at a markup on marginal cost which exactly covers fixed costs. Formally, the equilibria which arise here are equivalent to a regulated monopoly which sets price equal to average cost by edict. The structure of technology is identical for the monopolistic competition and contestable sectors. What is different is the determination of the markup on marginal cost. Under average cost pricing we have: m = F + c Y (26) The fixed cost per firm (F) remains fixed in all simulations while the level of industry output (Y) adjusts so that at price equals average cost the level of supply equals the level of demand. Pricing for Export Marrkets We presume that exports are priced at marginal cost for each of the non- competitive pricing rules. ADDITIONAL REFERENCES Mathieson, Lars, "Computation of Economic Equilibria by a Sequence of Linear Complementarity Problems", Mathematical Programming Study 23 (Amsterdam: North-Holland, 1985). A-9 APPENDIX B: THE TRADE REGIME IN TURKEY: A QUANTITATIVE ASSESSMENT OF TARIFF, NONTAtIFF BARRIERS AND EXPORT INCENTIVES In this appendix we provide a quantitative assessment of the trade regime in Turkey as of early 1990.3 This descriptive assessment is used as an input into our general equilibrium trade policy modelling. We decompose the assessment of the trade regime into three components: non-tariff barriers, tariff barriers (and their alignment with the EC) and export incentives. We conclude that as of early 1990 Turkey has generally eliminated its nontariff barriers. During the period of nontariff barrier reduction, Turkey was increasing its tariff barriers. Since 1 988, however, Turkey has also been reducing its tariff barriers. The magnitude and impact of export incentives in Turkey has been the focus of considerable interest and controversy (see Milanovic 119861, Celasum and Rodrik (19881, Rodrik 11988al, and Arslan and van Wijnbergen 119901). Consequently, an update on the magnitude of the export incentive regime is also essential in evaluating the overall trade regime. We note that although there were periods during the 1980s when the official exchange rate was overvalued, as of early 1990 the Turkish lira was convertible. This was reflected by the absence of a black market premium, despite a real appreciation of the lira between 20 and 25 percent in 1989. 1. Non-Tariff Baiers During the decade of the 1980s, and commencing in earnest at the end of 1983, Turkey gradually and steadily dismantled its extensive system of non-tariff barriers (NTBs).4 The last few remaining items that were subject to NTBs in 1989 (the "prior permission" list) were freed in 19905 Turkey does retain an import certificate I We wish to ta Deborsh Bata, m Muylou Uy. Michad Klein ad Omar K"aan for the povisin of daa and hclful commeab on the material in this AppadEL 'See BAys= and Bltzsr 119881 [19911, Rodrlk [1988b] and Gmis. de Melo nd Um [19861 for earlier discussionn of the impac of trade liberalizations in Turicy. 'Of ooune. impo of such a we and nsrcoic am restricted. B-1 and permit system; but neither restrains imports." As of early 1990, Turkey is best thought of as a country without NTBs. 2. Tariff Bartiers Turkey's tariff regime is a complicated system of at least 6 types of duties and surcharges. Moreover, there is an extensive system of exemptions from import taxation. Tables 81 and 82 summarize the exemption structure by sector, and tariff collection by type of import duty. From table B1 one sees that over 97 percent of mining imports are exempt from import taxation. From table 82 one may note that as a result of exemptions total import taxes were 37.2 percent of the value of dutiable imports in 1988, but only 12.5 percent of the value of total imports. While NTBs were being dismantled during the 1984-1988 period, tariff collections as a percentage of dutiable imports steadily rose from 24.8 percent to 37.2 percent, but fell in 1989 to 33.8 percent. In fact, tariffs were progressively lowered through 1989 (see table 83) and into 1990, so that they are lower in early 1990 than the average for 1989. 3. Alignment with the European Communities Beginning in 1973, Turkey initiated tariff harmonization with the European Communities (EC). This logically implies moving toward zero tariffs against EC imports and moving to the Common External Tariff (CET) against imports from non-EC countries.7 Products were placed on either a 12 or 22 year list, implying alignment with the EC by either 1985 or 1995. Turkey began postponing its obligations in 1977 and the process remained stalled until 1988. In 1988 Turkey announced a schedule of customs duty alignment with the EC through 1993. If continued at this same rate, it will bring about full alignment by 1995 (see table B4).8 With respect to the EC, all tariffs will have to be reduced, but some tariffs against third country suppliers may have to be increased. By and large CET harmonization implies a reduction in the level of nominal tariffs in Turkey. The principle problem for the alignment process is that the 'alignment" just discussed applies only to the lb cffate. which is ued by dac goverment, need oaiy be requescd at the 2 digit level is grant outiely whihin two days nd is valid for oue year. The izpoit panil in gntd by an audoried bank. 'We dbca in a momen an akefnstive inattation of CEI humonization which wa adopted by the Turkisb govemment in emaly discussionts of this polky. 'T policy. is hduled for re_ssment in 993. B-2 basic customs tariff. There are many import surcharges that are earmarked for special funds.9 Only partial or no alignment Is planned for the various surcharges. Thus, both the Support and Price Stabilization Fund (SPSFI surcharge and the stamp tax will be reduced against the EC from 10 to 6 percent each; as of eerly 1990. the announced alignmnont of these surcharges has not taken place on schedule. The Mass Housing Fund (MHF) and the Developmont and Support Fund (DSF) levieas are scheduled to be phased out within a period of five to six years starting In 1993.10 On average the basic custome duty Is loss than one-third of the total import tax paid. Since Turkey has a longstanding relatonship with the EC In which It enjoys duty free status on Its exports to the EC, the lack of full import tax alignment against EC Imports has been a source of annoyanceto the EC. Durln the last year or so, Turkey has considered converting all custome dutles and surcharges into a single Import tax which will then be at at zero on EC Imports and set at the CET on non-EC Imports. This plan remains controversial within Turkey, with some govemnment agencies opposing It because of revenue considerations. The concem here is that Turkey has so many exemptions from import taxation that Imposing a single tariff rate at the CET may significantly lowar overall tariff revenue, as compared to a system In which all Imports pay significant surcharge.. We Illustrate the differnces between these two versions of CET harmonization below and In the main text. 4. Expoft Incentives Data on Incentives to Turkish exports between 19885 and 1988 are summarized In table 85. We note that export subsidies as a percentageof total exports generally declined significanty, from 25 percent of exports in 1986 to 16 percent In 1988. Uv 119901 raports a further doclirn in export subsidies by 2 percent of the value of exports in 1989.11 We decomposa Incentives to exports Into two overall categories: (II incentives granted through the reduction in taxes that would otherwise be payable to the government: and (2) budgetary transfers from the govemnment to the firm. Category 11) Includes the following: (al waiver of payments of eustorn dudse (duty dnwback). Exporter' who hold encouragemont cert!ficates can Import duty free provided these imports are less than 40 to 80 per cent of the value of the exports. Holder of these certificates may also obtain foreign exchange at the official exchange rate for their Import needs. Given the absence of a foreign exchange premium above the otRicial rate In 1990, the ltter right of the export certificate has no value". fbi reduction in the amount of corporate Incone tax payable. Exporters with more than 9250,000 of Industrial exports may reduce their taxable incone by 18 percent of their export receipts (as of eady 19901. Other Industries that qualify Include fresh truits and vegetables, tourism revenues and intemationalair services ("aUy 119901 forturtherdetails). In 1988 Turkey introduced a value added tax (VAT). Any VAT paid which is related to exports Is rebated through the corporato Income tax systam. (c) waiver of the payment of Innirect taxes Irebates). Commoditias were classified Into various lists which ostensibly reflected their Indirect tax content. These rebates were eliminated after 1988. CategorY 2 of subsidies to firms Is almost entirely the SPSF. There is a lit of 107 commodities that are eligible for subaldies under the SPSF. The govenment obtains revenues for this fund from a combination of export taxes on major agricultural exports such as hazelnuts, raisins and lamb, and an Import surcharge that was 10 pereent In 1989 lup from 4 pereant in 1986). The govemnment plans to reduce the SPSF import 'See table B2 for their quantitative imt Reductim of the MHP an DSF rdidies commenced ahed of schedule in mid-1989. lhe calcuation for 1989 excludes the cumoa duty exmptow. so it s not stricty comprable. In naddition. holden of expo encouagemeat cerficates may obtain expoft cadit at below mte*a rte of int See Anla aS van Wrnbergen [(1990. B-3 surcharge by half a percentage point per six monthe until it reaches 6 percent In 19913 For the 1980-1984 peioid, Milanovic (19861 found great disparitieo In the export Incentives depending on the sector; for example the metal products, electrical machinery and non-ferrous metals Industries received extremely high aubsidles 194, 62 and 49 percent reopectively). The system In 1990 Is primarily dependent on tax Incentives ovailabla to any firm l86 percent of the Incentives to exports In 1988 were through category 1 tax Incentives) which should reduce the dispersion in the export subsides. The export subsidy rates employed in the study are discuesed In the next section. . Final Estnmstes Used In the Model There ae many detailed aspects of the trade regime In Turkey which it Is not possible to capture without considerable reconstructlon of existing data and/or extensions to the SOE framework. A good example is the way In which tax Incentives are used to Implement export subsidies. To the extent that theas Incontives have already been Included In the Input-Output table, we would have to reconstruct the affected transactions. Rebates on VAT are one such Incentive, and appear impliclty as differences in the VAT rates we observe In the 1985 10 table. Even If we could determine the sectoral values of these Incentives, we would need to make the VAT policy instrument in our model a function of the export subsidy policy Instrument. At present they are each specified exogenously as data. Naether of these data or modelling extensions are infeasible. However, we have been obliged to trade-off simplicity of formulatlon with .reality' In such instances, given the limited resources at our disposal. Table 86 lists the final estimates for each of the policy Instruments that are used In our model. We appreciate that there may be some biases In some of these numbers. and would encourage any reader with 'better numbers' to please share them with usl For the present, we simply point out several key features of these estimates In relation to the previous discussion. Firt, the VAT rates that we use show a great deal of variation across sector. One reason for auch variation, of course, are the exemptions from the VATdue to the export subsidy schemejust mentioned. Another reason is that the stattutory VAT rates are not indeed uniform. However, one further reason for the disparity we observe is that our rates are derived from observed collections data in 1985. The VAT had barely been Introduced In Turkey In 1 985, and it Is known that there were a great many administrative problems with collection procedures. We propose replacing these 1985 imputed rates with more recent data if we can obtain the latter. Second, the export subsidy rates seem to be a bit 'low'. Their weighted average, using 1985 exports as weights, is just over 7%. The averages we found from the data reported In Table 5 are much higher than this, specifically 19.4% and 14.8% In 1985 and 1988, respectively. One reason for the discrepancy Is that our data do not reflect the tax incentives, which accounted for 94.3% and 86% of all export Incentives In 1985 and 1988. These appear elsewhere in our data, as discussed above. Hence one might argue that we should scale up the export subsidy data we do have to reflect the greater Impact of export subsidies. On the other hand If the data that we do have only reflects budget-related subsidies (using the terminology of table 851 then our average 'Statemof Dr. rigrei, UndetcretayofSPO. Ad Hoc CommitteMeeidng. Brumeb. Dec. 20 ad 21. 1988. IEerc reunconfirmedrepol dthtaTurkey mmd. to contue wih tb progressive lowering of the SPSFipot chae 4 it rach4 percaiL Panerducon.howevere w behind chedul of early 1990. B4 level of subsidy I too high, and should be scaled down to ,und I or 2%. Faced wlth these altematives, we elected to maintain the valuee we have since there l a plausible case for scaling them up or d.wn. Third, the tariff rates eem at face vakue to be much more dispered than might be expected from our eadler discuesion of the Importance of uniform import urcharges. The explanation for ths appearnce Is that Turkey does have considerable dispersion in It's customs duty and In the proportion of Imports In each sector that Is exempt ftm any import taxation. Table 67 decomposse each of these components of the final tarff rate. The second column shows the percentage of Imports of this sectorthatwas dutiable li.e., non-exempt). The third column shows the statutoryoustoms duty. The next four columns report the values of various Import surcharges. Total Duty Is then defined as the sum of each of these surcharges and the customs duty. The Effective Duty Is then computed as the product of the total duty and the share of the sectores Imports that are dutiable. it is this last column which we use as our estimate of the benchmark tariff In our model. An Important operational Implicton of table 87 Is that one should be careful to understand that calling for a 'unifomT taiff' In our settn requires not only that the customs duty be made uniform but that the share of Imports that h dutiable also be made uniform. The latter undoubtedly Invoves a much more significant change In current practice. Table 86 lists our estimates of the various interpretatons of the policy of harmonization to the CET of the EC. The second column repeats the benchmark tariffs just discussed. The third column lists the nominal CET for 1986 reported In Cowley and Davenport (I 988; tables B6 & 871. The two rival Interpretations of hamonization are called CETI and CET2. CETi assumes that Imports from the EC receive a zero custome duty and that certain surchargea are reduced on them as discussed efler, the tariff rates shown as CETI -EC are the result. Taritfs on Rest of World IROW) Imports under CETI are computed by Just replacin the customs duty of table 87 with the CET; the tariff rates shown as CETI -ROW then result. Finally, the CET2 Interpretation in that the effective duty on EC Imports I set to zero but that the effective duty on ROW imports Is set equal to the CET.14 Table 88 demonstrates thatthere I a very significant difference In the nominal tariff regime In Turkey depending on which Interpretation of CET harmonization is adopted. AODMONAL REFERENCES Cawley, Richard. and Davenport. Ubhael. Partida EquHibrum Calbuatlonsof the Impact of intemal market BarrIre in the European Communky'y In European Commission. Studke on the Econornce of Integration (Bruse ls: EC, Series C8-52-88-493-EC-C. 19881. Ceasun, M. and Dani Rodrik. Debt. Adjustnwnt and Growth: Turkey, 1988. uNoew diat we do am Just a;ly tb CET o ROW inpot. aoswe pcrcef im that are dutiable in each aer mugt be tskm into mcomiL Fo cxmpe, hCie improf ACM frimtf ROWi 5.0%. butd hda sh dutbbie ny 22.3%. Hcncethedectivedut Ib 5.0(.223)- 1.1% srhown in tbe CE12-ROW colin. B-5 TABLE 8I: Tltan Analysi of 103 IMnpost. and Import Exnmptions Vakuee In Mllon US$) IOTaL VAM. mW Visa"ri TO UMB OUNCOMI.Woom mm UKWIWO' Xft 96 40 Tqt Von ot~~~~t_ V To Ms US= The Whole Economy 14,339.7 100.0% 4,470.8 31.2% 0.668.8 88.8% 7,347.0 74% - Exo. Cjds Petrleum 11,906.4 83.0% 4,447.6 37.4% 7,457.8 62.6% 4,969.1 68% Agricultu 464.8 3.2% 178.9 38,7% 278.0 81.3% 44.6 16% Mining 2,697.0 18.1% 73.8 2.8% 2,623.1 97.2% 2,476.8 98% Manufacturng 11.287.9 78.7% 4,221.1 37.4% 7,066.8 62.6% 4,826.7 68% ' A otLMfQ Consuner loods (MFG) 1,613.3 . 13.4% 602.3 43.8% 860.9 56.2% 682.2 68% Intartned Goods IMFG) 6,760.8 51.0% 2.176.4 37.8% 3,684.4 62.2% 1,713.8 48% Captal Goods IMFOI 4.013.8 36.8% 1,382.4 34.4% 2,631.4 66.6% 2,629.7 96% 2-01glt ISIC Sectors 31 Food.Boveragee,Tobaoco 693.6 5.3% 253.7 42.7% 339.9 57.3% 16% 32 Textiles & Leattr 328.8 2.9% 144.4 43.9% 1S4.2 56.1% 79% 33 Wood, Coit, & Product. 36.6 0.3% 16.1 46.3% 19.5 54.7% 100% 34 Paper & Punting 290.9 2.6% 77.4 26.6% 213.6 73.4% 38% 36 Chemicals. Petr. Coal 3,166.8 28.1% 1,422.0 44.9% 1,744.8 55.1% 62% 36 NonnetaUlIc Mnbals 192.6 1.7% 98.0 60.9% 94.5 49.1% 33% 37 Basic Metal Industlea 11,885.6 16.7% 497.1 26.4% 1,388.6 73.6% 34% 38 Metal Prods, Machinery 4,762.4 42.1% 1,682.7 36.4% 3,069.7 64.6% 95% 39 Other Manulotuwrft 41.9 0.4% 29.7 70.9% 12.2 29.1% 78% 3-Dlgit ISIC Sectors 311 Food Manudacturn 404.6 3.8% 65.8 16.2% 339.0 83.8% 16% 313 Bevetages 19.3 0.2% 18.8 97.1% 0.6 2.9% 66% 314 Tobacco 169.7 1.6% 169.3 99.8% 0.4 0.2% 100% 321 Textiles 271.9 2.4% 131.6 48.4% 140.4 61.6% 100% 322 WearInf Apparel 2.1 0.0% 1.8 64.0% 0.3 16.0% 100% 323 Leather Products 61.1 0.6% 7.7 16.1% 43.4 84.9% 9% 324 Foot Wear 3.6 0.0% 3.4 96.0% 0.1 4.0% 100% 331 Wood, Cork, & Products 26.6 0.2% 14.9 66.1% 11.7 43.9% 100% 332 WoodenFum&F trs 9.0 0.1% 1.2 13.2% 7.8 66.8% 100% 341 Paper Products 269.0 2.4% 71.8 28.06% 197.4 73.4% 33% 342 Printing & Pubflshlng 21.8 0.2% 6.8 28.7% 16.0 73.3% 100% 351 Industal Chemics 2.129.4 18.9% 937.8 44.0% 1,191.7 66.0% 68% 362 Other Chemical Prods 500.6 4.4% 277.1 65.4% 223.5 44.6% 93% 353 Petruleun RefinerIs 181.8 1.4% 119.1 73.6% 42.7 20.4% 67% 364 Petroleum & Coal Prods 278.4 2.6% 26.7 9.6% 261.7 90.4% 6% 365 Rubber PRoducu 64.8 0.6% 44.4 68.6% 20.4 31.4% 98% 356 Pbtsa Product Neov 31.9 0.3% 16.9 53.1% 16.0 46.9% 100% 361 Ceramic Product 13.4 0.1% 0.6 49.6% 0.8 60.6% 100% 362 Glases & Gles Producto 29.3 0.3% 19.9 68.I1 9.3 31.9% 100% 369 Other Nonnmt Min Prods 149.8 1.3% 71.4 47.7% 78.4 52.3% 20% 371 Iron & Steel 8-Mst t, 1,487.7 13.2% 378.1 25.4% 1,109.6 74.6% 33% 372 Nonferrous 8Met Ind 398.0 3.6% 119.0 29.9% 279.0 70.1% 36% 381 Metal Products Nec 387.3 3.4% 111.4 28.8% 275.9 71.2% 100% 382 Noneectric MahInry 2.293.6 20.3% 768.8 33.4% 1,627.0 66.6% 96% 383 Ebetrical Machinery 1,124.6 10.0% 388.1 34.3% 738.5 65.7% 96% 384 Transport Equipment 676.5 6.0% 282.4 38.8* 414.1 61.2% 98% 386 Scientifi EquIpment 270.4 2.4% 166.2 67.8% 114.2 42.2% 67% 390 Other Manufacturng 41.9 0.4% 29.7 70.9% 12.2 29.1% 78% B-6 q t TABLE 92: Sumov ary of Imports and Import Taxes: 1904-1988 (Values in billion Turkish Ura) 1984 1985 198 1987 1988 1989 (Prelim.) GDPATCURRENTFACTORCOSTS 17,349.1 25,526.1 35,627.8 52,928.6 91,38572 151,823.8 CIF TOTAL IMPORT VALUE 3,924.7 5,879.8 7,433.4 12,539.4 20,312.0 33,000 % Imports subject to duties 29.8% 35.8% 38.9% 34.2% 31.1% 30.0% IMPORTS SUBJECT TO DUTIES 1,169.5 2,105.0 2,742.9 4,288.5 6,317.0 9,400 REVENUE COLLECTIONS TAXES Gross Customs Duties (1) 187.1 228.1 345.8 505.7 704.6 727.7 Stamp Duty 18.1 74.2 135.2 300.0 507.1 968.8 Wharf Duty 41.4 62.1 60.6 92.1 129.1 252.4 TOTAL TAXES 226.6 362.4 541.4 897.8 1340.8 1948.9 LEVIES SPSF Import Surcharge 29.1 76.6 113.0 203.3 565.3 793.2 MHF/DSF Import Levies 33.9 79.2 174.8 291.0 446.4 607.3 Duties to Invest/FX Revenue Fund 2.1 8.2 53.4 88.4 185.6 0.5 TOTAL LEVIES 65.1 164.0 341.2 582.7 1197.3 1401.0 TOTAL IMPORT TAX REVENUES 291.7 526.4 882.6 1480.5 2538.1 3346.4 Import Revenues/GDP 1.7% 2.1% 2.5% 2.8% 2.8% 2.2% REVENUES AS % OF TOTAL IMPORTS TAXES Gross Customs Duties (1) 4.3% 3.8% 4.6% 4.0% 3.5% 2.2% Sta.m,p Duty 0.5% 1.3% 1.8% 2.4% 2.5% 2.9% Wharf Duty 1.1% 1.1% 0.8% 0.7% 0.6% 0.8% TOTAL TAXES 5.8% 6.2% 7.3% 7.2% 6.6% 5.9% LEVIES SPSF Import Surchargeq 0.7% 1.3% 1.5% 1.6% 2.8% 2.4% MHF/DSF Import Levies 0.9% 1.3% 2.4% 2.3% 2.2% 1.8% Duties to Invest/FX Revenue Fund 0.1% 0.1% 0.7% 0.7% 0.9% TOTAL LEVIES 1.7% 2.8% 4.6% 4.6% 5.9% 4.2% TOTAL IMPORT TAX REVENUES 7.4% 9.0% 11.9% 11.8% 12.5% 10.1% REVENUES AS % OF IMPORTS PAYING DUTIES TAXES Gross Customs Duties (1) 14.3% 10.7% 12.6% 11.8% 11.2% 7.3% Starrp Duty 1.5% 3.5% 4.9% 7.0% 8.0% 9.8% Wharf Duty 3.5% 3.0% 2.2% 2.1% 2.0% 2.5% TOTAL TAXES 19.4% 17.2% 19.7% 20.9% 21.2% 19.7% LEVIES SPSF Import Surcharge 2.5% 3.6% 4.1% 4.7% 8.9% 8.0% MHF/DSF Import Levies 2.9% 3.8% 6.4% 6.8% 7.1% 6.1% Duties to Invest/FX Revenue Fund (2) N.A. N.A. N.A. N.A. N.A. N.A. TOTAL LEVIES 5.4% 7.4% 10.5% 11.5% 16.0% 14.2% TOTAL IMPORT TAX REVENUES 24.8% 24.6% 30.2% 32.5% 37.2% 33.8% Note: (1) Includes revenues collected from municipality tax. (2) N.A. since imports paying this levy are not included as imports subject to duties. B-7 TABU 8l Evnb cr Tw*Mk ktna¶ Tact.: IOf Muvaw 3, SI AVERAGE TARtFFS AVERAGE TARIFF CHANGES 1988. Jan 89- MaV 89- Aug 89- 1988. 1989 1 89 5/89 8/89 11189 Jan88 Mav 89 Aug 89 Nov 89 Nov 89 TheWholeEconomv 23.9 25.4 22.5 17.7 10.9 8% *12% *21% -38% -64% - Agriculture 18.1 16.9 13.4 13.1 10.9 -7% -21% *2% *17% *40% Mining 17.4 14.1 14.1 13.0 6.7 *19% 0% -8% *48% -81% Menufecturin 24.6 26.2 23.3 19.0 11.0 7% *11% *23% -39% *65% Consumn Goocl IMFGi 34.6 35.3 30.8 21.4 17.4 2% -13% -31% *19% *50% Intwrned Goode IMFGI 18.8 17.2 10.1 13.4 5.7 4% -8% *17% *67% -85% Capital Goods IMFG) 29.8 28.3 24.4 21.7 10.1 -6% -14% -11% *63% .88% 31 Food,8everagee,Tobacoo 29.1 31.7 23.9 22.9 20.2 9% -25% *4% *12% *31% 32 Textiles & Leather 33.6 34.9 32.8 15.4 13.8 4% -4% -53% *10% -59% 33 Wood, Cork. & Product. 29.1 32.8 31.1 23.4 10.8 13% *6% *25% -54% .63% 34Paeper&Printing 15.5 18.7 18.3 17.3 4.5 21% *2% *5% .74% -71% 35 Chericeai, Petr, Coal 15.5 15.5 14.8 13.7 4.8 0% -5% *7% -06% *69% 36 Nonmetallic Minerals 33.1 33.8 28.2 23.0 16.3 2% -17% -18% *29% -51% 37 Basic Metd Industries I3.2 11.5 11.5 10.8 4.8 -13% 0% .8% .56% -64% 38 Metal Prods. Machiney 31.0 29.3 25.5 22.0 11.5 -5% -13% *14% *48% .83% 39OtherManufacturing 33.8 35.8 28.3 28.0 18.0 8% -21% *1% -43% *53% 311 Food Manufacturing 28.7 31.3 23.1 22.2 19.4 9% -2e% *4% -13% -32% Beverages 37.1 39.6 37.4 37.0 36.0 7% 68% .1% *3% *3% 314 Tobacco 26.0 25.0 25.0 25.0 25.0 0% 0% 0% 0% 0% 321 Textiles 33.1 34.2 32.6 11.8 11.5 3% -5% -84% -3% -65% 322 Wearing Appwarl 41.4 40.8 39.4 26.9 24.4 *2% -3% *34% -6% -41% 323 Leather Products 18.2 28.9 28.9 28.8 15.4 59% 0% -1% -48% -t15% 324Foot Wear 31.7 37.8 20.0 20.0 15.0 19% *47% 0% -25% -53% 331 Wood, Cork. & Products 26.3 30.2 30.2 23.7 9.5 15% 0% -22% .60% -64% 332 Wooden Fum & Fixtr 50.0 48.3 36.8 21.7 18.3 -3% *24% -41% -18% -83% 341 Paper Products 15.4 18.7 18.6 17.3 3.3 21% -1% *7% *81% -79% 342 Printing & Publishing 16.0 18.7 17.3 17.4 8.3 17% -7% 1% -52% *48% 351 Industria Chemicas 12.3 12.4 12.4 11.4 2.0 1t9 0% -8% -82% -84% 352 Other Chemical Prods 22.9 18.1 17.7 15.7 7.9 -21% -2% -11% -50% -68% 353 Petroleum Refenes 15.1 13.9 13.9 13.9 9.6 *8% 0% 0% -32% -37% 354 Petroleum & Coal Prods 10.9 16.9 18.9 1e.9 e.5 55% 0% 0% -62% -40% 355 Rubber Products 38.0 33.9 33.9 32.5 13.0 .8% 0% *4% -60% -64% 368 Plastic Product Nec 40.0 21.8 16.7 15.3 11.2 *46% *28% -3% -27% -72% 381 Cerarric Product. 35.7 37.2 33.4 23.6 18.0 4% -10% -29% -32% -55% 362 Gles & Glaes Producet 36.0 37.0 29.2 22.3 18.8 4% -22% -24% -25% -53% 389 Other Nonmet Min Prods 30.1 28.9 25.9 23.6 16.0 -4% *10% *9% -32% *47% 371 Iron & Steel B-Met Ind 11.9 10.5 10.5 10.4 2.7 -12% 0% -1% -74% -78% 372Nonfarrous8.MetInd 14.3 13.5 13.4 11.8 8.6 *6% -1% -12% -28% .40% 381 Mel Products Nec 39.3 35.8 31.8 28.2 16.4 -9% -11% -18% -37% -58% 382 Nonelectric Machinery 32.2 31.7 25.8 23.9 12.1 -2% -19% *7% -49% -62% 383 Electrical MachinerV 26.5 23.6 21.9 19.4 9.2 .11% -7% -11% *53% -85% 384 Transport Equipment 31.4 32.8 30.5 25.3 15.1 4% -7% -17% -40% -52% Scientific Equipment 23.2 20.9 18.2 13.0 4.5 -10% *13% -29% -65% -80% OtherManufacturing 33.8 35.8 28.3 29.0 16.0 6% .21% -1% -43% -53% B-8 l~~~~~~~~~~~~~~ TABLE B4 TURKEY - ANNOUNCED TARIFF REDUCTIONS (a) Schedule towards zero tariff rates with EEC Countries 12-Year List Reductions 22-Year List Reductions Year Annual Total Annual Total 1989 10% 40% 10% 30% 1990 10% 60% 10% 40% 1991 10% 60% 10% 50% 1992 10% 70% 10% 60% 1993* 10% 80% 10% 70% 1994vv 10% 90% 10% 80% 1995e 10% 100% 10% 100% (b) Schedule towards harmonization with the CET 12-Year List Adjustments 22-Year List Adjustments Year Annual Total Annual Total 1989 20% 20% 20% 20% 1990 0% 20% 0% 20% 1991 20% 40% 0% 20% 1992 0% 40% 20% 40% 1993* 40% 80% 0% 40% 1994* 0% 80% 40% 80% 1995 20% 100% 20% 100% * The schedules for 1993-1995 have not been announced. These estimate are good guesses based on discussions with SPO. B-9 TAg 8a 198 1988 1987 1g98 Totd Expot (gm000 7,959,100 7,456.800 10,190,100 11,602.071 Tain Ir.(vee: Rdoat (VAT) (TL mmd 287.378 281,801 437,207 e74,s02 (8Oo00 554,420 420,e77 510,947 476,391 (35.9) (22.41 (21.6) (27.8) Coporat Tex ROt)on M 1mm) 76,600 129,700 357,800 677,859 NM0001 147,778 193,756 418,147 478,549 (9.6) (10.3) (17.7) 27.7) Cunom Outv Exmmph (n mm) 391,818 693,50e 1,001,193 748,747 ($80) 755,909 1,030,104 1.170,050 528,593 (48.9) (55.1) (49.6) (30.6) Totld Tax Rdatd (tO0) 1,458,108 l,tff,537 2,099,150 1.493,533 (94.3) 487.7) (98.9) (98.0) Bug2t Rdaed &,bsdi: SPSF (TTL mnwl 0 8,102 145,500 330.347 (9000 0 12,103 170,040 233.215 (0.8) (7.2) (13.5) RUSP (TI mnel (s000 Totd Subsk1u from EB. (9000) 87,838 230.522 261.453 241,366 (5.7) (12.31 (11.1) (14.0) Tot) leoe (NM)000) 1,545,946 1.8S1,059 2.360.eo3 1,724,899 (100) (100) (100) (100) ft-rftedExp- 19.4 25.2 23.2 14.8 Exdeu ReA (Tu9US) 518.3 868.4 855.7 1416.5 Flg hi pwaud we . hI tod hoentivet. B-10 TABLE 66 Final Eetimates of Policy Instrunmnts (exprossed In percentages) 1985 1989 Export Production ID Sector Tariffs Tariffo Subsidles VAT Subsidles AGR Agriculture 4.1 8.0 0.9 4.2 AIR Air Transport 2.3 ALC Alcoholic Beverages 22.0 72.3 8.2 4.7 ANI Animal Husbandry 15.0 e.0 0.9 APP Wearing Apparel 8.3 22.8 13.5 12.8 BLD Building Construction 16.5 CEM Cement 3.9 2.6 18.0 7.5 CHM Other Chemical Products 19.8 15.7 15.7 11.4 2.4 COL Coal Mining 0.7 0.7 7.8 3.4 COM Communication 2.5 8.3 2.8 2.0 CON Other Construction 4.5 ELE Electricity 3.6 2.0 ELM Electrical Machinery 35.3 11.0 29.7 9.4 FAB Fabricated Metal Products 48.4 10.0 69.7 12.8 FIN Financial lnstitutions & Insurance 9.7 FIS Fisheries 23.5 34.9 0.3 FOR Forestry 20.5 3.9 1.1 FRT Fertilizers 1.3 2.5 15.7 2.5 0.9 GAS Gas Manufacture & Waterworks 3.4 GLS GIbss & Glass products 03.0 31.8 16.9 5.2 IRN Iron & Steel 16.3 4.6 21.4 20.1 LND Other Land Transport 3.6 0.8 MAC Machinery except Electrical 20.2 10.5 9.6 6.0 0.8 MEA Meat Processing 13.7 4.2 8.2 1.8 OFP Manufacture of Other Food Products 38.7 30.1 8.2 15.0 OMP Other Non-metallic Mineral Production 27.1 32.5 9.5 OWN Ownership of Dwellings 2.0 PPS Personal & Professional Services 0.6 18.9 PUB Public Services REF Petroleum Refineries 150.7 18.2 15.7 RES Restaurants & Hotels 9.2 RUB Rubber Products 49.8 25.3 20.0 7.7 SUG Sugar 16.9 32.3 8.2 8.4 9.0 TEX Textiles 26.2 19.4 13.5 14.1 TOB Tobacco 52.1 67.3 2.4 TRD Wholesale & Retail Trade 10.5 VEG Vegetable & Animal Oils & Fats 2.9 3.9 8.2 12.1 0.8 VEH Lend Transport Vehies & Equipment 24.6 20.1 15.1 25.8 WAT Water Transport 2.3 2.8 WOO Wood & Cork Products 23.0 13.7 1.6 13.e B-il TABLE 87 C4,W"wW of VA E¶wt.8 T.W IW. 0. T."4 Pw" CwtoJ To8M EWGC ODob 0 S r v E sFm a W *. MHF09 F o v 0t AOM 22. 2.5 Io0 10.0 4.0 0.3 34.8 7.8 AOR 17.8 1 2 100 10.0 4.0 8.3 33.5 8.0 ALC 100.0 40.0 100 10.0 4.0 8. 72.3 72.3 AM 17.8 1.2 10.0 10.0 4.0 8.3 33.5 4.0 APP 722 17.3 10.0 10.0 4.0 83 40.0 38.8 8EV 70e 30.4 10.0 10.0 4.0 8.3 42.7 48.3 CEM 6.1 0.1 10.0 ¶0.0 4.0 8.3 32.4 2.8 cm 49.2 0.8 ¶0.0 10.0 4.0 8.3 332 10.4 co. 0.0 10.0 i0.0 4.0 8.3 32.3 1.8 CRU 0.8 10.0 10.0 4.0 8.3 32.3 0.2 D8O e2 0.9 0.0 10.0 4.0 8.3 33.2 2.7 ELM 31.8 2.4 10.0 10.0 4.0 8.3 34.7 11.0 FA8 27.5 4.1 *0.0 *o.0 4.0 8.3 3e.4 0o.0 FIB 82.5 10.0 1o0 10.0 4.0 8.3 42.3 34.0 FOO 63.8 8.0 10.0 10.0 4.0 8.3 0.3 21.8 FOR 12.0 0.4 *o0o 10.0 4.0 83 32.7 3.9 FRN 27.3 0.4 ¶0.0 10.0 4.0 0.3 37.7 10.3 FRT 7.7 0.4 ¶.O0 ¶0.0 4.0 8.3 32.7 2.5 FRU 90.7 18.7 a0o ¶0.0 4.0 8.3 49.0 47.3 FtOR .4 0.7 *0.0 10.0 4.0 8.3 33.0 2.1 GM 342 0.7 *0.0 10.0 4.0 83 33.0 ¶1.3 088 74.2 10.5 10.0 10.0 4.0 8.3 42.0 31.8 0RN 7.4 0.1 *o0 10.0 4.0 8.3 32.4 2.4 fN 13.3 0.1 10.0 ¶0.0 4.0 8.3 32.4 4.3 IRD 17.5 oo *0.0 *0.0 4.0 8.3 32.4 5.7 MAC 27. 2.5 10.0 10.0 4.0 83 34.8 9.8 UEA 12.8 0.2 10.0 10.0 4.0 8.3 32.5 4.2 NWm 184 0.8 10.0 ¶0.0 4.0 8.3 32.9 e.0 NFO 7.8 0.1 10.0 10.0 4.0 8.3 32.4 2.8 NMM ¶0.5 0.2 ¶0.0 ¶0.0 4.0 8.3 32.5 5.4 OFP 08.7 ¶0.3 10.0 ¶0.0 4.0 8.3 42.0 29.3 0O1 51.8 3.e 10.0 ¶0.0 4.0 8. 35. 1¶8.6 OMP 75.7 8.5 10.0 0.0 4.0 8.2 40.8 32.5 OTE 7.1 0.1 ¶o0 ¶0.0 4.0 8.3 32.4 2.3 PAP 38.8 0.8 10.0 10.0 4.0 0.3 332 12.8 PET 27. 1.5 ¶o.0 10.0 4.0 8.3 33.8 92 PLO 07.0 7.2 o0 10.0 4.0 8. 3S.0 22.8 Po 342 4.3 ¶00o ¶0.0 4.0 8.3 38.8 12.8 REF 49.0 0.3 10.0 *0.0 4.0 83 32.8 102 FM 12.1 1.7 ¶eo ¶0.0 4.0 8. 34.0 4.1 RUS 04.5 7.0 10*0 10.0 4.0 8.3 39.3 25.3 SHP 7.3 1.2 ¶0.0 ¶0.0 4.0 8.3 33.6 2.4 8w 64.8 4.7 ¶0o0 10.0 4.0 8.3 37.0 24.0 sUe 100.0 1OO ¶0.0 4.0 8.3 32.3 32.3 TEX 51.7 5.4 ¶0.0 ¶0.0 4 0 8.3 37.7 19.5 TOO ¶00.0 25.0 10.0 o0.0 4.0 e.3 57.3 57.3 VEO 6.8 0.1 ¶0.0 ¶0.0 4.0 83 32.4 1.8 VEN 80.4 9.8 ¶0.0 ¶0.0 4.0 8.3 42.1 28.8 WoO 04.8 3.8 *0.0 ¶0.0 4.0 8.3 35.0 ¶0.8 B-12 TABLE BS Effective Tarff Under Alternative CET Hanmonization Policies Benchmark CET CETI-EC CET1-ROW CET2-ROW AGIV 7.8 5.0 5.4 8.3 1.1 AGR 6.0 4.3 5.7 ALC 72.3 15.0 24.3 47.3 15.0 ANI 6.0 4.3 5.7 APP 35.8 12.5 17.5 32.3 9.0 BEV 49.3 10.0 19.1 33.2 7.9 CEM 2.6 2.0 2.6 CHM 16.4 6.5 12.0 19.1 3.2 COL 1.6 1.2 1.6 CRU 0.3 0.2 0.3 DRG 2.7 6.5 2.0 3.2 0.5 ELM 11.0 5.5 7.7 12.0 1.7 FAB 10.0 5.6 6.7 10.4 1.5 FIS 34.9 20.0 26.6 FOO 21.6 10.0 13.0 22.6 5.3 FOR 3.9 2.9 3.9 FRN 10.3 4.8 6.6 10.1 1.3 FRT 2.5 1.9 2.5 FRU 47.4 7.0 23.5 38.0 6.8 FUR 2.1 7.5 1.8 2.5 0.5 GIN 11.3 10.0 8.3 14.5 3.4 GLS 31.8 4.0 18.0 26.9 3.0 GRN 2.4 1.8 2.4 IRN 4.3 3.0 3.2 4.7 0.4 IRO 5.7 3.0 4.3 6.2 0.5 MAC 9.6 5.0 6.7 10.3 1.4 MEA 4.2 20.0 3.1 6.7 2.6 NFM 6.1 3.0 4.5 6.5 0.6 NFO 2.6 3.0 1.9 2.8 0.2 NMM 5.4 5.0 4.0 6.2 0.8 OFP 29.3 16.5 16.7 33.5 11.3 OMI 18.6 5.3 12.6 19.5 2.8 OMP 32.5 19.4 25.7 OTE 2.3 6.5 1.7 2.8 0.5 PAP 12.9 5.5 9.4 14.7 2.1 PET 9.2 6.6 8.8 PLS 22.8 8.0 14.0 23.2 4.6 PRI 12.8 2.7 8.5 12.2 0.9 REF 16.2 12.1 16.1 RRE 4.1 6.5 2.9 4.7 0.8 RUB 25.3 6.3 15.7 24.9 4.1 SHP 2.4 6.5 1.8 2.8 0.5 STO 24.0 5.0 15.7 24.2 3.2 SUG 32.3 80.0 24.3 112.3 80.0 TEX 19.5 10.0 12.6 21.9 5.2 TOB 57.3 30.0 24.3 62.3 30.0 VEG 1.8 15.0 1.4 2.6 0.8 VEH 28.8 6.5 16.6 26.5 4.4 Woo 19.6 5.2 13.3 20.5 2.8 B-13 APPENDIK C: CALIBRATION OF THE MODEL 1. Data Sources The most important dataset for our purposes is the 198S Input-Output table for Turkey obtained from the State Planning Organization of Turkey. Tbis 10 table identifies the following 64 sectors, listed below with their three-letter acronym: AOM ApWImlmm w4dooy & "Mm"ioa AOl Api-ulWr AM Alf! Uinp- AM AW=l Hmbm*dy A"P Wfa.b qym WBV BaR drid & marbuad ~ cm OUN c'* - COL Cmi mwh 4mm Cmnm,aImke WN Odkt I I A"' cltu Crude P ku & n11u1 p 010 DuW & medkba ELS M - PAS Fabtkimiod id pudiac PM4 Ficdd hgwdum a uso FOO Foowiaw I40l Fcr"u FN Wa wiao& flxtww PIT FMJ LaPer afu tptb au M Pouft & "wo GAS F Yu;m & IN" ut, GIN C0id mui -ab MiN imol e & fi MD kw m mbbkg Lum Odaor - awprt MAC machW mapt ebc& MmU Non-forrou m1d we0 Nmnwe am MmUS NFM Nasowso mbmI abbs OPP mdcule d dbaw foad pmdmctim OMa O0ba _zahoMgb h&Is GM? Olr -m.bUo -hadi podmaam 0l O- aI D_ P qu 0Tn Odw q_pot owN O ofp dwmd_h PA? Fapar a par padawb PET Plmza & cm podiEb PU rProduc PM n enowd a padtuuiml maV PR[ Prudip & pbag PUB Public ow m REF PatralUwa agbaat RB' Rm~aUiwua , haoi. WLW Rsi-y Usprt -R Ralkod q C-i RUB Rubber proda SHP Shbkulding & rpafing cmD St" qmnyin uow &Wpr IEX Tomcio (Gin.L gin lOB Tobao TRD whoinial & rtell aSd& VEo Vegeibb & ai-;- oils & fob VEHI Land uwwpod vhkci & e quipmin WAT Water hwsport WOO Wood & ooik produM There are a large number of sectors identified here that are minuscule in terms of their contribution to total value added. We elected to aggregate 24 of these sectors with other sectors, using our own priors as to which sectors they would be best aggregated with. The resulting mapping, indicating aggregated sector and sector aggregated to, is as follows: CRU -> COL Cmdo Peeolem & Iwuuel gp IRO -> COL Iran ore minng NFO -> COL N-forms amng NMM -> COL N-mealL;c mimcl min STO - > COL StW qTyig FRU -> VBO Pmni & vegetbls pmoming URN - > VBG Omm mil paduts B8V - > OFP Soft drinks & oarbmatd swr GIN - > Tl)X Gina FUR-> APP L h &fur prducb POO -> APP Footear FRN - > WOO Wood fure h fiures PAP - > WOO Peper & par produt EU -> COM Printing & publihin DRO-> CHM DnsW & medici PET -> CHM Petlum & coal products PLS -> CHM Phdipro&"dus NFM -> IRN Nm-ferrus mel AOM -> MAC AgrVulwl mbiney & equipmo SHP -> MAC Sibilding & rairing RR8 -> VEH Raid equipmem OT8 -> VEH Odtr tupoc equpmmt ONO -> MAC Other manucri ing RLW -> LND RParly buuot Thus we see, for example, that the CRU, IRO, NFO and NMM sectors are all added to the COL sector in the 40-sector aggregation used throughout. Our final aggregation consists of the following sectors: AOl AgrcAuro AM Al toop ALC A bc&i bWmge AM A-)l Hutbanry A" Woahig qR. BSW ° uldingawden aM Ceoam CND Othr 0mk p- ODL Cal minin WDK Communictm CON Other coaeVtn ElS Eectcity C-2 PAR Fwbriwed mdel produb FIN Fimchl imwMU A hAmmao FIB FVherim FMR P °Or, FRT Fetliza 0AS X rowfacuo h& voWrnC& OLI 01m & glzm produa MEN Ira & Ste LAD Odr hnd emm bAC Nydniy oxept 61*rid USEA N~tP-,ioo gm OFP M2N1ufactkr of oteo food pmodw OMP Other ni c1i mbmi prducti OWN Ownerhs of dwellio PPS Persna A pro(euiaul "momo PUB Publ .erviom REP Pdtol.m f'oric' RES Remuraw A hotesk RUII Rubber produot PUG Sulpr Tint TexlSr (oxwl. gimie) TOR Tohcoo tRD Whoksle & regl tdo VBG Voetable & mnim oils & fob VBH LAad busport vebicls h equipm-a WAT Wale btmm wvo Wood & cork prowti 2. Elasticities The text explained the sources for each of the elasticities in the model. The specific values emplotyed are listed below. ETRN is the elasticity of transformation between domestic & exports. ESUBKL is the factor substitution elasticity. ESUBDD is the product differentiation substitution elasticity. ESUBDM is the domestic-imports substitution elasticity. ESUBMM is the imports-by- source substitution elasticity. MU is the price elasticity of the Armington aggregate. Ser 81RN BSUBKL BSUBDD E8UBDM ESUBMM MU AOR 2.9Q0 0.945 IO0.OQ 2.000 5.000 2.000 AIR 2.900 1.884 10.OOD 2.000 5.000 2.000 ALC 2.900 0.945 10.000 2t00 5.000 2.000 ANI 2.900 0.945 IO0.0D 2.000 5.000 2.000 APP 2.900 0.927 10.0D 3.400 5.000 2.000 BID 2.900 1.9S8 10.000 2.000 5.000 2.000 CEM 2.90D 0.958 10.000 M.SO0 5.0Q0 2.000 CNM 2.900 l.OQ9 10.000 l.SOO 5.000 2.000 COL 2.9Q0 0.426 10.000 0.500 5.000 2.000 COM 2.900 1.988 10.OQO 2.00 5.000 2.0QO CON 2.900 1.988 10.000 2.000 5.000 2.000 MEl 2.900 1.884 10.000 2.00 5.000 2.000 EtM 2.900 0.981 10.O0 1.300 5.000 2.0QO FAB 2.900 0.911 10.000 1.500 5.00 2.000 FIN 2.900 2.055 10.000 2.ODD 5.0S0 2.000 FIS 2.90D 0.945 10.000 2.000 5.000 2.0QO FOR 2.900 0.945 10.000 2.000 5.000 2.0QO FRT 2.900 1.009 10.000 1.400 5.000 2.000 OAS 2.900 1.8S4 10.000 2.000 5.000 2.000 OLS 2.900 0.958 10.000 1.400 5.000 2.000 IRN 2900 0.911 10.000 0.500 5.000 2.OD LND 2.900 1.884 10.000 2.000 5.000 2.00Q C-3 MAC 2.90D 1.202 10.000 0.500 5.000 2.000 MBA 2.90D 0.945 10.O0D 0.5C0 5.000 2.000 OFP 2.900 0.945 10.00D 0.500 5.00 2.000 OMP 2.900 0.958 10.000 0.I00 5.000 2.000 OWN 2.90D 1.988 10.000 2.000 5.00 2.000 PPS 2.900 2.055 10.000 2.OOD 5.000 2.000 PUB 2.900 1.988 10.000 2.C00 5.000 2.00D RI low2.40 0.293 10.0C0 0.340 5.000 2.000 RR8S 2.900 3.125 10.000 2.00 5.000 2.000 RUB 2.9C0 0.972 10.000 1.300 5.000 2.000 SUO 2.900 0.945 IO.OC0 2.000 5.000 2.000 TQC 2.900 0.927 10.000 2.000 5.000 2.000 TOB 2.900 0.839 10.000 2.00D 5.000 2.00D TRD 2.900 1.283 10.000 2.000 5.000 2.000 VBG 2.900 0.945 10.000 1.700 5.000 2.000 VEH 2.900 1.884 10.000 2.000 5.000 2.000 WAT 2.9C0 1.884 10.000 2.00 5.000 2.000 WOO 2.900 0.745 10.lO 2.000 5.000 2.000 C4 APPENDIX D: SENSITIVITY ANALYSIS OF RESULTS In this appendix we document the systematic sensitivity analysis of our simulation results. The statistical procedures employed are those developed by Harrison and Vinod [1992] and implemented in the MPSS software developed by Harrison [1990]. Essentially these procedures amount to a Monte Carlo simulation exercise in which a wide range of elasticities are independently and simultaneously perturbed from their benchmark values. These perturbations follow prescribed distributions, such as a t distribution with a specified standard deviation and degrees of freedom, or a uniform distribution over a specified range. The exact distributional assumptions used are documented below in a file which is used by the MPSS software to set up the Monte Carlo simulations. For each Monte Carlo run we solve the counter- factual policy with the selected set of elasticities. This process is repeated until we arrive at the desired sample size, in our case 1000. The results are then tabulated as a distribution, with equal weight being given (by construction) to each Monte Carlo run. The upshot is a probability distribution defined over the endogenous variables of interest. In our case we focus solely on the welfare impacts of each policy. The exact distributional assumptions we used have been described in the main text. Exact documentation is provided by the following "SSA" file, to use the jargon of the software MPSS described in Harrison [19901. In the interests of space we will not explain how to interpret this file. To a large degree it is reasonably self-explanatory, and to the extent that it is not the reader can consult Harrison [1990] and Harrison and Vinod [1992]. The file is as follows: SSANPLB: 1000 COMMODITY ... va.BLD SMPS: upold mp~O0 COMMODITY ... wLC8M SMAPMU NUL COMMODrIY ... mLCHM SSAV& COMMODrITfY ... va.COL SINTBORATl 0 1.073 COMMODITf ... n.COM SHISOORAM: 15 COMMODrIY ... wa.CON SCINTERVALS: 5D 55 6D 65 70 75 80 85 9D 9510D COMMODr OD ... w.B.L SFPRCENT: F/ALB COMMODrIY ... v.IEM $SCRATCH: D: COMMODITY ... va.FAB COMMODIlTY ... u COMMODITY ... v.FIN COMMODIT ... f.L COMMODIrT ... w.FIS COMMODIrY ... f.K COMMODITY ...v w.FOR COMMODITY ... ..AOR COMMODrrY ....FRT COMMODITY ... W.AIR COMMODITY ... v.GAS COMMODITY ... a.A. C COMMODITY ... v.aLS COMMODITY V"... NI COMMODrrY ....IRN COMMODrrY ...Va.APP COMMODITY .... w.LND D-1 COMMODIrT ... vLMAC COMMODrrY ... c.FRT COMMODrlY ... va.MBA COMMODrrY ... c.OAS COMMODrTY ... vw.OFP COMMODrTY ... c.OLS COMMODITY ... w.OMP COMMODlTY ... c.IRN COMMODITY ... Va.OWN COMMODITY ... c.LND COMMODITY ... va.PPS COMMODITY ... c.MAC COMMODITY ... ..PUB COMMODITY ... c.MEA COMMODITY ... vaw.RF COMMODIlY ... c.OFP COMMODITY ... va.RBS COMMODITY ... cOMP COMMODrfT ... vw.RUB COMMODITY ... c.PPS COMMODllY ... va.SUO COMMODrrY ... c.RHF COMMODrTY v..TEX COMMODITY ... c.RBS COMMODITY ... ...TOB COMMODrrY ... c.RUB COMMODITY ... vim.TRD COMMODITY ... c.SUG COMMODITY ... va.VEO COMMODITY ... c.TEC COMMODrIY ... va.VEH COMMODIYf ... o.TOB COMMODITY ... va.WAT COMMODITY ... c.TRD COMMODITY ... vadWOO COMMODIT ... c.VEO COMMODITY ... go COMMODITY ... c.VEH COMMODITY ... fs COMMODrTf ... c.WAT COMMODITY ... nvk COMMODITY ... c.WOO COMMODITY ... aJAR PRODUCTION ... I a: 0.000 COMMODITY ... a.AIR PRODUCllON ... I a: 0.0O0 COMMODrIT ... a.ALC PRODUCTION ... I b: 0.000 COMMODITY ... a"ANI PRODUCTION ...I c :0.000 COMMODITY ... a.APP PRODUCTION ... I d: 0.000 COMMODITY ... a.BLD PRODUCTION ... I L..0.000 COMMODITY ... a.CEYA PRODUCTION ... Y.AOR a: 0.000 * 0.0 0.5 1.0 COMMODITY s... aCHM PRODUCTION ... YAOR a: 0.000 COMMODITY ... a.COL PRODUCTnON ... YAOR b: 0.000 COMMODITY ... a.COM PRODUCnON ... YAOR c: 0.000 COMMODITY ... a.CON PRODUCnON ... YAOR ..d O.OD COMMODITY ... LELE. PRODUCTION ... Y.AGR t: 2.900 n 1.3 5 COMMODITY ... a....M PRODUCnON ... YAMR a: o.o0o o 0.0 0.5 1.0 COMMODrIY ... a.FAB PRODUCTION ... YAMR a: 0.000 COMMODITY ... a.FIN PRODUCTION ... YAIR 6b: O.O0 COMMODITY ... aFIS PRODUCTION ... YAMR c o.0o0 COMMODrrY ... aFOR PRODUCTION ... Y.AIR d: 0.000 COMMODITY ... aFRT PRODUCTION ... Y.AIR t. 2.90D n 1.3 5 COMMODITY ... aa.UA PRODUCTION ... YALC a: 0.000 o 0.0 0.5 1.0 COMMODITY ... a.OLS PRODUCnON ... YALC a: O.OD COMMODITY ... aIRN PRODUCTION ... Y-ALC b: 0.000 COMMODITY ... a.LND, PRODUCTION ... Y.ALC :0.000 COMMODITY .. aMAC PRODUCTION ... Y.ALC d: 0.000 COMMODITY ... aMeA PRODUCnON ... YALC t 2.900 a 1.3 5 COMMODITY ... a.OFP PRODUCTION ... YJAM s: O.DD a 0.0 0.5 1.0 COMMODITY ... aOMP PRODUCTION ... Y.ANI a: 0.00 COMMODITY ... a.OWN PRODUCnON ... Y.ANI b6 0.000 COMMODITi ... a.PPS PRODUCnON ... Y.ANI c: 0.000 COMMODITY ... a.PUB UPRoDuCnON ... YAM d. O.0D0 COMMODITY ... a.RF PRODUCTION ... Y.ANI t 2.900 n 1.3 5 COMMODITYr ... LRHS PRODUCTION ... Y-APP a: o.o0o a 0.0 0.5 1.0 COMMODrIY ... a.RUB PRODUCTION ... YAP? a: 0.000 COMMODITY ... aSUO PRODUCTION ... YAPP b: 0.000 COMMODITY ... a.TEX PRODUCTION ... Y.APP : 0.000 COMMODITY ... a.TOB PRODUCION ... YAPP d. 0.000 COMMODITY ... a.TRD PRODUCnON ... YAP t 2.900 n 1.3 5 COMMODITY ... a.vBO PRODUCTON ... Y.BLD a: 0.000 a 0.0 0.5 1.0 COMMODITY ... a.VEH PRODUCTON ... Y.BLD a: 0.000 COMMODrIT ... a.WAT PRODUCTION ... Y.BLD 6b: O.OO COMMODITY ... a.WOO PRODUCTION ... Y.BLD o0.000 COMMODITY ... cAUR PRODUCTION ... Y.BLDE d 0.000 COMMODITY ... cAR PRODUCTON ... Y.BLUD .t 2.900 n 1.3 5 COMMODITY ... cALC PRODUCTON ... Y.CEM a: 0.OCO a 0.0 0.5 1.0 COMMODITY ... c.ANI PRODUCTION ... Y.CEM[ a: 0.00D COMMODITY ... cAPP PRODUCTION ... Y.CEM b: O.O0 COMMODITY ... c.BLD PRODUCnON ... Y.CEM c:0.00o COMMODITY ... c.CEM PRODUCnON ... Y.CEM d. 0.000 COMMODITY ... c.CHM PRODUCnON ... Y.CEM t 2.9W n 1.3 5 COMMODITY ... .COL PRODUCTION ... Y.CHM a: o.00 o 0.0 0.5 1.0 COMMCDITY ... .COM PRODUCTON ... Y.CHM a: 0.00D COMMODITY ... C.ELE PRODUCTION ... Y.CHM b: 0.000 COMMODTY .....M PRODUCTION ... Y.CHM :0. 0oo COMMODITY ... c.FAB PRODUCTON ... Y.CHM d: 0.000 COMMODITY ... c.FIN PRODUCnON ... Y.CHM Lt 2.900 n 1.3 5 COMMODITY ... c.FIS PRODUCTON ... Y.COL a: o.oo0 a 0.0 0.5 1.0 COMMODITY ... c.FOR PRODUCTION ... Y.COL a: 0.000 D-2 PRODUCrION ... Y.COL b:0O.000 PRODUCTION ... Y.tLND a: .000 MRODUCTION ... YTCOL c: 0.000 PRODUCnION ... Y. LND b: 0.000 PRODUCTION ... Y.COL d. 0.000 MRODUCrION ... Y.IND c: 0.00) MRODUCTION ... Y.COL L- 2.900 a 1.3 5 PRODUCTON ..Y.LND d: 0.000 RODUCTION ... Y.Com a: 0.000 a 0.0 0.5 1.0 PRODUCTION ..Y.LND t: 2.900 1.3 5 MRODUCTION ... Y.COM a: 0.000 PRODUCrION ... Y.MAC a:O 000 a.0 0.5 1.0 MRODUCTION ... Y.COM b: 0.000 PRtODUCTnON ... Y.MAC 8:.000 MRODUCrION ... Y.COM c:0.000 PRODUCTION ... Y.MAC b: 0.000 PRODUCrION ... Y.COM4 d: 0.000 PRODUCrION ... Y.N(AC c: 0.000 PRODUCTION ... Y.COM t.- 2.900 n 1.3 S PRODUCTION ... Y.MAC d: 0.000 PRODUCTION ... Y.CON s: 0.000 0.0 0.5 1.0 PRODUCTION ... YTMAC L 2.900 1.3 5 PRODUCTION ... Y.CON a: 0.000 PRODUCTION ... Y.IAEA 0.000a 0.0 0.5 1.0 PRODUCTION ... Y.CON b: 0.000 PRODUCTION ... Y.MBA a:0.000 MRODUCTION ... Y.CON c: 0.000 PRODUCTION ... Y.MEA b: 0.000 MRODUCrION ... Y.CON d.- 0.000 PRODUCTION ... Y.MEA 0: 0.000 PRODUCTION ... Y.CON Lt 2.900 a1.3 5 PRODUCTION ... Y.MEA d: 0.00) PRODUCTION ... Y.EL.B a: 0.000 0.0 0.5 1.0 PRODUCTION ... Y.MHA t: 2.900D 1.3 5 PRODUCTION ... Y.MZ a: 0.000 PPODUCTION ... Y.OFP a: 0.000 0.0 0.5 1.0 PRODUCTION ... Y.EMZ b: 0.000 PRODUCTION ... Y.OFP a: 0.000 PRODUCTION ... Y.LE8 0: 0.000 PRODUCTION ... Y.OFP b: 0.00) PRODUCTION ... Y.ELH d: 0.00) PRODUCTION ... Y.OFP c: 0.000 PRODUCTION ... Y.ELH L~ 2.900 1.3 5 PRODUCTION ... Y.OFP d: 0.00 PRODUCTION ... Y.ELM a: .000 0.0 0.5 1.0 PRODUCTION ... Y.OFP t 2.900 1.3 S PRODUCTION ... Y.ELM a 0.000 PRODUCTION ... Y.OM~P a: 0.000 0.0 0.5 1.0 PRODUCTION ..Y.FLM b: 0.000 PRODUCTION ... Y.OM? a: 0.000 PRODUCTION ... Y.ELM C: 0.000 PRODUCTION ... Y.OMP' b: 0.000 MRODUCTION ... Y.WLM d: 0.000 PRODUCTION ... YTO? 0: 0.000 PRODUCTION ... Y.EIJM t: 2.900 n 1.3 5 PRODUCTION ... YTOM?P d: 0.00) PRODUCTION ... Y.FAB a:0,000 a0.0 0.5 1.0 PRODUCTION ... T.OMP L 2.900) n 1.3 S PRODUCTION ... Y.PAB a:0.000 PRODUCTION ... Y.OWN a:0.000 a 0.0 0.5 1.0 PRODUCTION ... Y.FAE b:0O.000 PRODUCTION ... Y.OWN a:0.000 PRODUCTION ... Y.FAB c- 0.000 PRODUCTION ... T.OWN b: 0.000 PRODUCTION ... Y.FAB d: 0.000 PRODUCTION ... Y.OWN 0: 0.000 PRODUCTION ... Y.FAB t. 2.900 a1.3 5 PRODUCTION ... Y.OWN d: 0.000 PRODUCTION ... Y.PIN a: 0.000 0.0 0.5 1.0 PRODUCTION ... Y.OWN t., 2.900 n 1.3 S PRODUCTION ... Y.FIN a: 0.000 PRODUCTION ... Y.PPS a 0.000 a 0.0 0.5 1.0 PRODUCTION ... Y.FIN b:0.000 PRODUCTION ... Y.PPS a:0.000 PRODUCTION ... '(FIN 0: 0.000 PRODUCTION ... Y.PPS b:0.00D0 PRODUCTION ... Y.FIN d. 0.000 PRODUCTION ... Y.PPS c: 0.000 PRODUCTION ... Y.FIN :2.900 n 1.3 5 PRODUCTION ... Y.PPS d: 0.000 PRODUCTION ... Y.FIS OA: 0.0 0.0 0.5 1.0 PRODUCTION ... Y.PPS tw- 2.900 n 1.3 5 PRODUCTION ... Y.FIS 80.000 PRODUCTION ... Y.PUB a 0.00) a 0.0 0.5 1.0 PRODUCTION ... T.PIS b: 0.000 PRODUCTION ... Y.PUB a: .000 PRODUCTION ... Y.FIS a: 0.000 PRODUCrION ... Y.PUB b: 0.000 PRODUCTION ... Y.FIS d. 0.000 PRODUCTION ... Y.PUS 0: 0.000 PRODUCTION ... Y.PIS Lt 2.900 n 1.3 5 PRODUCTION ... Y.PUB d: 0.000 PRODUCTION ... Y.FOR a- 0.000 s 0.0 0.5 1.0 PRODUCTION ... Y.PUB t: 2.900 n 1.3 S PRODUCTION ... Y.FOR a: 0.000 PRODUCTION ... YTREF s: 0.000 a 0.0 0.5 1.0 PRODUCTION ... Y.FOR b: 0.000 PRODUCrION ... Y.RIIF a: 0.000 PRODUCTION ... Y.FOR 0: 0.000D PRODUCTION ... T.REP b: 0.000 PRODUCTION ... Y.FOR d.~ 0.000 PRODUCTION ... Y.REF 0:0O.000 PRODUCTION ... Y-FOR t. 2.900 a 1.3 5 PRODUCTION ... Y.REF d: 0.000 PRODUCTION ... Y.FRT a: .000 a 0.0 0.5 1.0 PRODUCTION ... T.REF t~ 2.900 n 1.3 5 PRODUCTION ... Y.FRT a:0.000 PRODUCrION ... Y.RSS a: 0.000 0.0 0.5 1.0 PRODUCTION ... Y.FRT b: 0.000 PRODUCTION ... Y.RES a: 0.000 PRODUCTION ... Y.FRT c: 0.000 PRODUCTION ... YTRES b:0.000D MRODUCTION ... Y.FRT d.~ 0.000 PRODUCTION ... Y.RES c:0.000D PRODUCTION ... Y.FRT t. 2.900 n 1.3 5 PRODUCTION ... YARES d: 0.000 PRODUCTION ... YOM A : 0.000 0.0 0.5 1.0 PRODUCTION ... Y.RES t.: 2.900D 1.3 5 PRODUCTION ... YTOM a: .000 PRODUCTION ... Y.RUB a: 0.000a 0.0 0.5 1.0 PRODUCTION ... T.OM b: 0.000 PRODUCTION ... Y.RUB a: 0.000 PRODUCTION ... TOGA c:0.000 PRODUCTION ... T.RUB b: 0.000 PRODVCTION ... T.OA d: 0.000 PRODUCTION ... Y.RUB 0:0.000 PRODUCTION ... Y.OAS t: 2.900 n1.3 5 PRODUCTION ... T.RUE d:0O.000 PRODUCTION ... YOQU a: 0.000 0.0 0.5 1.0 PRODUCTION ... T.RUE t 2.900 n 1.3 S PRODUCTION ... YOUI a: 0.000 PRODUCTION ... Y.SUO a 0.000 a 0.0 0.5 1.0 PRODUCTION ... Y.OU b: 0.000 PRODUMTON ... Y.SUO a:0.000 PRODUCTION ... Y.OLS c:0.000 PRODUCTION ... Y.SUO b: 0.000 PRODUCrION ... Y.OL d: 0.000 PRODUCTION ... Y.SUO c: 0.000 PRODUCTION ... Y.OIJ t 2.900 1.3 5 PRODUCTION ... Y.SUO d: 0.000 PRODUCTION ... YlIRN a 0.000a 0.0 0.5 1.0 PRODUCTION ... Y.SUO t: 2.900 a 1.3 S PRODUCTION ... Y.IRN a .000 PRODUCTION ... Y.TEX 8:.000 0.0 0.5 1.0 PRODUCTION ... Y.IRN 6: 0.000 PRODUCTION ... T.TEX a:0.000 PRODUCTION ... TIlRN c:0.000 PRODUCTION ... Y.THX b:0.000D PRODUCTION ... T.IRN d.~ 0.000 PRODUCTION ... Y.TEX c:0.000 PRODUCTION ... Y.IRN Lt 2.90D 1.3 5 PRODUCTION ... Y.TEX d: 0.000 PRODUCTION ... Y.LND) 8: 0.000 0.0 0.5 1.0 PRODUCTION ... Y.TMX t 2.900D 1.3 5 D-3 PRODUCrION ... Y.TOB s: O.ODO s 0.0 0.5 1.0 PRODUCnON ... V.CEM v.e 0.000 PRODUCrION ... Y.TOH a.' 0.00D PRODUCTION ... V.CHM *:1.010 a .0268 5 PRODUCTION ... Y.TOD b: 0.00 PRODUCTION ... V.CHM 8:0.000 PRODUCTION ... Y.TOB c:0.000 PRODUCTION ... V.CHM b: 0.000 PRODUCTION ... Y.T08 .d. 0.0J0 PRODUCTION ... V.CHM a. o.0o0 PRODUCTION ... Y.TB 2.900 n 1.3 5 .RODUCTION .. V.CHM d: 0000 PRODUCnON ... Y.TRD, A:.00 0.0 0.5 1.0 PRODUCTION ... V.CH4M t 0.000 PRODUCTION .... Y .TRD 0.000 PODUCTION ... V.COL 0: 430 n .105 5 PRODUCTION ... Y.TRD b: 0.000 PRODUCTION ... V.COL a: 0.00 PRODUCTION ... Y.T9D a: 0.000 PMODUCTION ... V.COL b: 0.000 PRODUCTION ... Y.TRD d. 0.0J0 PRODUCTION ... V.COL c: 0.000 PRODUCtION ... Y.TRD e 2.90D a 1.3 5 PRODUCTION ... V.COL d: 0.000 PRODUCTION ... Y.VBO 0.000 oa 0.0 0.S 1.0 PRODUCTION ... V.COL t. 0.00 PRODUCTION ... Y.VEO 8:0.000 PRODUCTION ... V.COM : 1.990 n .477 5 PRODUCTION ... Y.VO b: O.AO PRODUCTION ... V,COM a: 0.000 PRODUCTION ... Y.VEO 0:0.000 PRODUCTION ... V.COM b: O.OD PRODUCTION ... Y.VBG d: 0.000 PRODUCTION ... V.COM c: 0.000 PRODUCTION ... Y.VBO L' 2.0D0 a 1.3 5 PRODUCTON ... V.COM d:0.0D0 PRODUCTION ... Y.VEH 0.000 a 0.0 0.5 1.0 PRODUCTION ... V.COM e. 0.000 PRODUCTION ... cVEH 0.000 PRODUCTION ... V.CON : 1.990 n .477 5 PRODUCTION ... Y.VEH b: 0.00 PRODUCnON ... V.CON :0.000 PRODUCTION ... Y.VBH c: 0.000 PRODUCTION ... V.CON b: 0.000 PRODUCTION ... Y.VBH d: 0.000 PRODUCTION ..V.CON c: 0.000 PRODUCTION ... Y.VEH e 2.900 n 1.3 5 PRODUCTION ... V.CON d: 0.000 PRODUCTION ... Y.WAT : 0.000 0.0 0.5 1.0 PRODUCTION ... V.CON e 0.000 PRODUCTION ... Y.WAT 0:0.000 PRODUCTION ... V.LB : 1.80L n .249 5 PRODUCTION ... Y.WAT b: 0.000 PRODUCTION ... V.1L8 a: 0.0D0 PRODUCTION ... Y.WAT c: 0.00 PRODUCnON ... V.ELB b: O.O PRODUCTION ... Y.WAT d: 0.000 PRODUCTION ... V.eLB c: 0.00 PRODUCTION ... Y.WAT u 2.900 a 1.3 5 PRODUCTION ... V.BL d: 0.000 PRODUCTION ... Y.WOO :0.000 a 0.0 0.5 1.0 PRODUCTION ... V.BLB O.W PRODUCTION ... Y.WOO a 0.0D0 PRODUCTION ... V.EIM s: o0.980 n .0267 5 PRODUCTION ... Y.WOO b: 0.000 PRODUCTION ... V.BLM a: 0.000 PRODUCTION ... Y.WOO 0: 0.000 PRODUCTION ... V.ELM b: 0.000 PRODUCTION ... Y.WOO d: 0.000 PRODUCTION ... V.ELM c: 0.000 PRODUCrION ... Y.WOO e 2.9S D 1.3 5 PRODUCTION ... V.EL d: 0.000 PRODUCTION ... V.AOR a: 0.940 a 0.041 5 PRODUC1ION ... V.ELM t.e 0.000 PRODUCTION ... VAOR a.: 0.0D0 PRODUCTION ... V.FAB a: 0.910 D .2411 s PRODUCTION ... VAOR b: O. PRODUCTION ... V.FAB a 0.0D0 PRODUCTION ... V.AOR 0: O.0o PRODUCnON ... V.FAB b: 0.0D0 PRODUCTION ... V.AUR d: 0.00W PRODUCTION ... V.FAB ca 0.000 PRODUCTION ... V.AUR : 0.000 PRODUCnON ... V.FAB d. 0.000 PRODUCTION ... VAUtR a: I.880 n .2489 5 PRODUCTION ... V.FAB t:.e OD0 PRODUCnON ... V.AIR a: 0.O0 PRODUCTION ... V.FIN a: 2.050 .255 5 PRODUCTION ... VAIR b: 0.00 PRODUCTION ... V.FIN a: 0.0D0 PRODUCnON ... VAIR c: 0.000 PRODUCTION ... V.FIN b: 0.0D0 PRODUCnON ... VAIR d: 0.000 PRODUCnON ... V.FIN 0: 0.000 PRODUCTION ... V.AIR U. 0.000 PRODUCTION ... V.FIN d.' 0.000 PRODUCTION ... V.ALC s: 0.0 n .041 5 PRODUCTION ... V.FIN e 0.0D0 PRODUCTION ... V.ALC a.: O.O0 PRODUCTION ... V.FIS a: 0.940 n .0407 5 PRODUCTION ... VALC b: 0.000 PRODUCTION .... V.IS a: 0.0D0 PRODUCTION ... V.ALC 0.: 0.0o PRODUCTION ... V.IS b: 0.000 PRODUCION ... VALC .d 0.000 PRODUCTION ... V.FI 0: 0.000 PRODUCnON ... V.ALC e0.0D0 PRODUCTION ... V.XS d 0.00D0 PRODUCrION ... V.ANI 8:0.940 n .041 5 PRODUCTION ... V.eS U O.0D0 PRODUCTION ... V.ANM .a 0.0D0 PRODUCTION ... V.OR a: 0.940 n .04015 PRODUCTION ... V.ANI b: 0.000 PRODUCTION ... V.FOR a: 0.000 PRODUCTION ... VAN[ c: 0.0J0 PRODUCTION ... V.FOR b: 0.000 PRODUCTION ... VANI d. d0.000 PRODUCnON ... V.FOR a: 0.0D0 PRODUCIO0N ... VANI U 0.000 PRODUCnON ... V.OR d: O.WO PRODUCTION ... VAPP s: 0.930 n .0766 5 PRODUCnON ... V.FOR e 0.0D0 PRODUCTION ... V.APP a: 0.000 PRODUCrION ... V.FRT .: 1.010 n .0268 s PRODUCrION ... V.APP b: 0.000 PRODUCnON ... V.8RT a: 0.000 PRODUCTION ... VAPP c: 0.0oo PRODUCTION ... V.FRT b: 0.000 PRODUCTION ... V.APP d: O.WO0 PRODUCTION ... V.FRT e: 0.000 PRODUCTION ... V.APP : e0.W0 PRODUCTION ... V.FRT d. 0.000 PRODUCnON ... V.8LD, s: :90 .477 5 PRODUCIION ... V.FRT U 0.000 PRODUCTION ... V.BLD a: 0.000 PRODUCTION ... V.0AS a: LsD n .2489 5 PRODUCTION ... V.BLD 6b: o.0o PRODUCrION ... VCAS a: 0.000 PRODUCrION ... V.8B.1) c: 0.00D PRODUCTION ... VbAS b0.000 PRODUCTION ... V.BUD d: 0.000 PRODUCTION ... VOAS c: 0.000 PRODUCllON ... V.BLD u 0.0oo PRODUCTION ... VOAS d 0.000 PRODUCTION ... V.CEM s: 0.960 n .1317 5 PRODUCTION ... V.OAS 0.' Q000 PRODUClION ... V.CEM a: 0.000 PRODUClION ... V.*. :0.960 a .1317 5 PRODUCTION ... V.CEM : 0.AD PRODUCnION ... V.ULS .a: 0.0 PRODUCTION ... V.CEM c: 0.000 PRODUCIION ... V.01. b: 0.000 PRODUCTION ... V.CEM d. 0.000 PRODUCTION ... V.01.8 c: O.000 D4 PRODUCrION ... V.OL. d. 0.000 PRODUCTION ... V.SUO 0: 0.000 PRODUCTION ... V.01t8 !: 0.000 MODUCrION ... V.SUO d: 0.000 PRODUCTION ... V.IRN 0: 0.910 a .2411 5 PRODUCTION ... V.SUO L' 0.000 PRODUCTION ... V.tRN a: 0.000 PRODUCTION ... V.TEX a: 0.930 a.0766 5 PRODUCTION ... V.IRN b: 0.000 MODUCTION ... V.THX a: 0.000 PRODUCTION ... V.IRN c: 0.000 MRODUCTION ... V.T9C 6: 0.000 PRODUCTION ... V.IRN d. 0.000 PRODUCTION ... V.THX c: 0.000 PRODUCTION ... V.IRN t: 0.000 PRODUCTION ... V.TSX d: 0.000 PRODUCTION ... V.LND e: 1.880 a.2489 5 MRODUCTION ... V.TEX t: 0.000 PRODUCrION ... V.tNT) a: 0.000 MRODUCTION ... V.TOD a:O.W4 .0893 5 PRODUCTION ... V.LND b: 0.000 PRODUCTION ... V.TOB 80.000 PRODUCTION ... V.LND w:0.000 PRODUCTION ... V.TOB b: 0.000 PRODUCTION ... V.LND d. 0.000 PRODUCTION ... V.TOB 0: 0.000 PRODUCTION ... V.LND L' 0.000 PRODUCTION ... V.TOB d: 0.000 PRODUCTION ... V.MAC a: 1.200 n .0897 S PRODUCTION ... V.TOB L~ 0.000 PRODUCTION ... V.MAC a: 0.000 PRODUCTION ... V.TRD) s:1.29D n .525 S PRODUCTION ... V.MAC b: 0.000 PRODUCTION ... V.TRD, a: 0.00 PRODUCTION ... V.M(AC 0:0O.000 PRODUCTION ... V.TRD b: 0.000 PRODUCTION ... V3.MAC d: 0.000 PRODUCTION ... V.TRD 0: 0.000 PRODUCTION ... V.MAC t: 0.00 PRODUCTION ... V.TRD d. 0.000 PRODUCTION ... V.MEA a: 0.900a .0407 5 PRODUCTION ... V.TRD L, 0.000 PRODUCTION ... V.WlEA a: 0.000 PRODUCTION ... V.VEG a: 0.940 n .0407 5 PRODUCTION ... VAMEA b: 0.000 PRODUCTION ... V.VBO a; 0.000 PRODUCTION ... V.MEA o: 0.000 PRODUCTION ... V.VBO b: 0.000 PRODUCTION ... V.MB d.~ 0.000 PRODUCTION ... V.VEO 0: 0.000 PRODUCrION ... V.ME3A t- 0.000 PPOI)ULCTION ... V.VEO d: 0.000 PRODUCTION ... V.OFP o: 0.940a .0407 5 PRODUC'TION ... V.VUO L, 0.000 PRODUCTION ... V.OFP a: 0.000 PRODUCTION ... V.VEIH :1.880 3 .2489 5 PRODUCTION ... V.OFP b: 0.000 PRODUCTION ... V.VHH 0:.000 PRODUCTION ... V.OFP 0:0.000 PRODUCTION ... V.VEH b: 0.000 PRODUCTION ... V.OFP d., 0.000 PRODUCTnON ... V.VElI c:0.000 PRODUCTION ... V.OFP L' 0.000 PRODUCTION ... V.V89H d. 0.000 PRODUCTION ... V.O0l a: 0.9E0a .1317 5 PRODUCTION ... V.VEH L, 0.000 PRODUCTION ... V.OMP a:0.000 PRODUCTION ... V.WAT s: 1.880 n .2489 5 PRODUCTION ... V.0Wl b: 0.000 PRODUCTION ... V.WAT a: 0.000 PRODUCTION ... V.0MP 0:0.000 PRODUCTION ... V.WAT b6:0.000 PRODUCTION ... V.0Wl d: 0.000 PRODUCTION ... V.WAT c, 0.000 PRODUCTION ... V.0Wf t 0.000 PRODUCTION ... V.WAT d. 0.000 PRODUCTION ... V.OWN a. 1.090 a.477 5 PRODUCTION ... V.WAT u. 0.000 PRODULTION ... V.OWN a: 0.000 PRODUCTION ... V.WOO 8: 0.740 a .1136 5 PRODUCTION ... V.OWN b: 0.000 PRODUCTION ... V.WOO a: 0.000 PRODUCnION ... V.OVWN c: 0.000 PRODUCTION ... V.WO0 6: 0.000 PRODUCrION ... V.OWN d& 0.000 PRODUCnION ... V.WO0 a- 0.000 PRODucTIoN ... V.OWN t~ 0.000 PRODUCnION ... V.WOO d. 0.000 PRODUCnION ... V.PPS s: 2.050 n .255 5 PRODUCTION ... V.WOO L' 0.000 PRODUCTION ... V.PPS a: 0.000 PRODUCTION ... A.AOR 8: 2.000 m .5.75 1.0 1.25 1.5 PRODUCTION ... V.PPS b: 0.000 PRODUCTION ... A.AOR 8:5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... V.PPS 0:0O.000 PRODUCTION ... A.AOR b: 0.000 PRODUCTION ... V.M9 . 0.000 PRODUCTION ... A.AOR 0: 0.000 PRODUCTION ... V.PPS O .000 PRODUCrION ... A.AOR d. 0.000 PRODUCTION ... V.PUB a 1.990 a .477 5 PRODUCTION ... A.AOR L, 0.000 PRODUCTION ... V.PUB a. 0.00 PRODUCTION ... A-MIR s: 2.000 m .5 .75 1.0 1.25 1.5 PRODUCTION ... V.PUB b: 0.000 PRODUCTION ... A.AI a: 5.000 * 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... V.PUB 0:.000 PRODUCTION ... A.AI b: 0.000 PRODUCTION ... V.PUB & .000 PRODUCTION ... A.AI a: 0.000 PRODUCTION ... V.PUB u 0.000 PRODUCTION ... A.AI d: 0.000 PRODUCTION ... V.RE a: 0.290 a.1016 5 PRODUCTION ... A.AIR t: 0.000 PRODUCTION ... V.R89P a. 0.000 PRODUCTION ... A.AL 8: 2.100 m .5 .75 1.0 1.25 1.5 PRODUCTION ... V.REP b: 0.000 PRODUCTION ... A.AL a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCrION ... V.RF 0: 0.000 PRODUCTION ... A.AL b: 0.000 PRODUCTION ... V.RF L' 0.000 PRODUCTION ... A.AW 0:0.00DD PRODUCTION ... V.REF t. 0.000 PRODUCTION ... A.AL d. 0.000 PRODUCTION ... V.RBS s: 3.12D .817 5 PRODUCTION ... A.ALC t: 0.000 PRODUCrION ... V.RBS a: 0.000 PRODUCTION ... AAN s: 2.000 m .5.75 1.0 1.25 1.5 PRODUCTION ... V.RES b: 0.000 PRODUCTION ... A.AN a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... V.RBS a. 0.000 PRODUCTION ... A.AN b:0.000 PRODUCTION ... VASS d.' 0.000 PRODUCTION ... A.AN c: 0.000 PRODUCTION ... V.RES t: 0.000 PRODUCTION ... A.AN d: 0.000 PRODUCTION ... V.RUB a: 0.970 n .082 5 PRODUCTION ... A.AN t 0.000 PRODUCTION ... V.RUB a: 0.000 PRODUCTION ... A.AP s: 3.400 m .5.75 1.0 1.25 1.5 PRODUCTION ... V.RUB b: 0.000 PRODUCTION ... A.AP a:' 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... V.RUB c0 0.000 PRODUCTION ... A-APP b: 0.000 PRODUCTION ... V.RUB d: 0.000 PRODUCTION ... A.APP c:0.000D PRODUCTION ... V.RUB t: 0.000 PRODUCrION ... A-APP d: 0.000 PRODUCnION ... V.SUO e: 0.940 a .0407 S PRODUCTION ... A"AP t. 0.000 PMODUCTION ... V.SU0 a: 0.000 PRODUCIION ... A.BL.1 a: 2.ODD m .5.75 1.0 1.25 1.5 PRODUCTION ... V.SUO b: 0.000 PRODUCTION ... A.DLD a: 5.000 s 3.0 4.0 5.0 6.0 7.0 D-5 PRODUCION ... A.BLD) b: 0.000 PRODUCTION ... A.OLS i: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.BLD c: 0.000 PRODUCTION ... A.OLS. b: 0.000 PRODUCnON ... A.BLD d. 0.00D0 PRODUCnON ... A.GOLS 0:0.000 PRODUCTION ... A.BLD Le 0.000 PRODUCTION ... A.OLS d: 0.000 PRODUCTION ... A.CES4 a: 0.800 m .5 .75 1.0 1.25 1.5 PRODUCTION ... A.OLS t: 0.000 PRODUCTION ...C. A :CBM a 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... ArIRN a: 0.5D0 m .5 .73 1.01.25 1.5 PRODUCTION ... A.CBM b: 0.000 PRODUCTION ... A.IRN a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.CM c:0. c00D PRODUCnON ... A.IRN b: 0.000 PRODUCnON ... A.CEMW d 0.000 PRODUCnON ... A.IRN 0: 0.000 PRODUCTION ... A.CEM ..e Q0.00 PRODUCTION ... A.IRN d: 0.00D0 PRODUCnON ... A.CHM s: 1L.O00 m .5 .75 1.0 1.25 1.5 PRODUCTION ... A.IRN U; O.ODO PRODUCTON ... A.CHM a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.LND a: 2.000 m .5 .75 1.0 1.25 1.5 PRODUCnON ... A.CHM b: 0.000 PRODUCnON ... A.LND a: 5.0DO a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.CHM .0 eooo PRODUCnON ... A.LND 1b: 0.000 PRODUCrION ... A.CNM d. 0.000 PRODUCnON ... A.LND c: 0.030 PRODUCTION ... A.CHM : e0.030 PRODUCnON ... A.LND d: 0.000 PRODUCTION ... A.COL .: 0.500 im .5.75 1.01.25 1.3 PRODUCnON ... A.LND e.. 0.00D PRODUCnON ... A.COL &: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.MAC a: 0.500 m .5 .75 1.0 1.25 1.5 PRODUCnON ... A.COL b: 0.000 PRODUCTION ... A.MAC a: 5.0DO a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.COL c: 0.000 PRODUCTION ... A.MAC b: 0.000 PRODUCTION ... A.COL &. 0.00D PRODUCTION ... A.MAC c: O.OD0 PRODUCTON ... A.COL t. 0.000 PRODUCTION ... A.MAC d: 0.000 PRODUCTON ... A.COM a: 2.00D D .5 .75 1.0 1.25 1.5 PRODUCTON ... A.MAC 1: 0.000 PRODUCTION ... A.COM a: 5.00D a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.MEA s: 0.530 m .5 .75 1.0 1.25 1.5 PRODUCTION ... A.COM b: O.ODO PRODUCTION ... A.MEA a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.COM 0:0.000 PRODUCnON ... A.MEA b: 0.000 PRODUCTION ... A.COM &. 0.030 PRODUCTION ... A.MEA c: O.OD PRODUCnON ... A.COM e 0.000 PRODUCT7ON ... A.MEA d: 0.000 PRODUCTION ... A.BLB s: 2.00D m .5.75 1.01.25 1.5 PRODUCTION ... A.M1A t: 0.000 PRIODUCTON ... AL.BL a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.OFP a: 0.530 m .5 .75 1.0 1.25 1.5 PRODUCnON ... A.ELB b: 0.000 PRODUCnON ... A.OFP a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCTON ... A.B.ELB :0.0DO PRODUCTION ... A.OFP b: 0.000 PRODUCTION ... A.HEL d: 0.000 PRODUCTION ... A.OFP :c O.ODO PRODUCnON ... A.eZB t. 0.000 PRODUCTION ... A.OFP d: 0.000 PRODUCnON ... A.BLM a: 1.30D m .5 .75 1.01.25 1.5 PRODUCnON ... A.OFP Ut O.ODO PRODUCnON ... A.ELM a: 5.000 s 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.OMP s: 0.800 m .5 .75 1.0 1.25 1.5 PRODUCnON ... A.ELM b: .000 PRODUCTnON ... AOMP a: 5.000 s 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.ELM c: 0.000 PRODUCnON ... A.OMP b: 0.000 PRODUCTION ... A.ELM d. 0.000 PRODUCnON ....OMP A. c: 0.00 PRODUCTON ... A.ELM O0.000 PRODUCTION ... A.OMP d: O.OD0 PRODUCTION ... A.FAB g: 1.5D m .5 .75 1.01.25 1.5 PRODUCTION ... A.OMP t. O.OD PRODUCTON ... A.FAB a: 3.O0 s 3.0 4.0 5.0 6.0 7.0 PRODUCTON ... A.PPS 8: 2.000 m .5 .75 1.01.25 1.5 PRODUCTION ... AFABS b: 0.O00 MODUCnON ... A.PPS a: 5.00D a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.AS : :0.00D PRODUCTION ... A.PPS b: 0.00D PRODUCnON ... A FABH d: 0.000 PRODUCTION ... A.PPS c: 0.000 PRODUCTON ... A.FAB te O.ODO PRODUC PON ... A.PPS d: 0.000 PRODUCTION ... A.FIN a: 2.OD0 in .5.75 1.0 1.25 1.5 PRODUCTION ... A.PPS e 0.00D PRODUCTION ... A.FIN a: 5.000 s 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.ReF a: 0.340 m .5 .75 1.01.25 1.5 PRODUCnON ... A.FIN b: 0.000 PRODUCTION ... A.REF a: .000 s 3.0 4.0 5.0 6.0 7.0 PRODUCTON ... A.FIN e 0.030 PRODUCTION ... A.REF b: O.OD0 PRODUCTION ... AXFIN d: 0.000 PRODUCTION ... A.REF c: O.ODO PRODUCTION ... A.FIN L 0.00D PRODUCTION ... A.REF d: 0.00D PRODUCTION ... A.FIS a: 2.O00 m .5 .751.01.25 1.5 PRODUCTION ... A.REF e 0.000 PRODUCTON ... A.PIS a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.RES a: 2.000 m .5 .75 1.01.23 1.S PRODUCTON ... AFIS b: O.O0 PRODUCTION ... A.RES a: 3.000 s 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.FIS c: o.0o PRODUCTION ... A.RES b: 0.000 PRODUCnON ... A.FIS d: O.O0 PRODUCTION ... A.RES : 0.000 PRODUCTION ... A-FIS L, 0.000 PRODUCllON ... A.RES d: O.ODO PRODUCnON ... A.FOR s: 2.000 m . .75 1.0 1.25 1.3 PRODUCTION ... A.RES t. 0.030 PRODUCTON ... A.FOR a: 3.000 s 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.RUB a: 1.300 m .5 .7 1.01.25 1.3 PRODUCnON ... A.FOR b: 0.00 PRODUCTON ... A.RUB a: 53.000 3.0 4.0 3.0 6.0 7.0 PRODUCnON ... A.FOR 0:0.000 PRODUCTION ... A.RUB b: 0.00 PRODUCnON ... A.FOR &. O.O0 PRODUCTION ... A.RUB c: 0.000 PRODuCnON ... A.FOR 1:. 0.000 PRODUCTION ... A.RUB d: 0.000 PRODUCTION ... A.FRT a:.400 A .5.73 1.01 25 1.3 PRODUCnON ... A.RUB te 0.00 PRODUCnON ... A.FRT a: 5.000 a 3.0 4.0 5.0 6.0 7.0 MODUCnTON ... A.SUO m: 2.000 m .S .75 1.0 1.25 1.5 PRODUCnON ... A.FRT b: 0.000 PRODUCTION ... A.SUO a: 5.O0 a 3.0 4.0 3.0 6.0 7.0 PRODUCnol ... A.FRT c: 0.000 PRODUCnON ... A.SUO b: 0.000 PRODUCTON ... A.FRT d 0.000 PRODUCTON ... A.SUG e : O .OD: PRODUCnON ... A.FRT te O:.0 PRODUCTON ... A.SUO d: O.OQ PRODUCnON ... A.AS s : 2.OO m .3 .7 1.0 1.25 1.5 PRODUCTION ... A.SUO 1 0.000 PRODUCTION ... A.oAS a: 5.0o0 a 3.0 4.0 3.0 6.0 7.0 PRODUCnON ... A.TEX a: 2.000 m .5 .75 1.0 1.25 1.5 PRODUCTnON ... A.ous b: 0.000 PRODUCTON ... A.TEX a: 5.000 s 3.0 4.0 5.0 6.0 7.0 PRODUCON ... A.oAS 0:0.000 PRODUCTON ... A.TEX b: 0.000 PRODUCTION ... A.oAS d. 0.000 PRuDUCTION ... A.TEX : 0.000 PRODUCTION ... A.GAS e:0000 PRODUCnON ... A.TEX d: 0.000 PRODUCMON ... A.LOLS s 1.400 m .3 .73 1.0 1.25 1.5 PRODUCTnON ... A.TTK e 0.000 D-6 PRODUCnON ... A.TOB s: 2.00 m .5 .75 1.0 1.25 1.5 PRODUCnON ... A.TOB a: 5.00 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.TOB b: O.ODO PRODUCnON ... A.TOB c: O.ODO PRODUCnON ... A.TOB d: O.OD PRODUCnON ... A.TOB t O.OD PRODUCnON ... A.TRD *: 2.000 m .5 .75 1.0 1.25 1.5 PRODUCnON ... A.TRD a: 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.TRD b: 0.000 PRODUCTION ... A.TRD c: O.O0 PRODUCION ... A.TRD d. O.000 PRODUCnON ... ATRD c O.OD PRODUCnON ... A.VEG : 1.70 m .5 .751.01.25 1.5 PRODUCTON ... A.VE 5.000 a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.VBO b: O.OD PRODUCnON ... A.VEB c: O.OD0 PRODUCTION ... A.VBO d 0.000 PRODUCnON ... A.VEO Le 0.000 PRODUCTION ... A.VEH a: 2.000 m .5 .75 1.01.25 1.5 PRODUCTION ... AVEH a: 5.0D a 3.0 4.0 5.0 6.0 7.0 PRODUCnON ... A.VEH b: O.OD PRODUCnON ... A.VEH c: O.O0 PRODUCnON ... A.VEH d: O.O0 PRODUCnON ... A.VEH c O.O0 PRODUCnON ... A.WAT a: 2.00D mS .75 1.01.25 1.5 PRODUCnON ... A.WAT a: 5.O0 a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.WAT b: o.o0 PRODUCnON ... A.WAT c: O.OD PRODUCnON ... A.WAT & O.OD PRODUCnON ... A.WAT t 0.000 PRODUCTION ... A.WOO s: 2.00 m .5 .75 1.0 1.25 1.5 PRODUCTION ... AWOO : 5.00D a 3.0 4.0 5.0 6.0 7.0 PRODUCTION ... A.WOO b: O.0D0 PRODUCnON ... A.WOO a: O.O0 PRODUCnON ... A.WOO d. 0.00 PRODUCnON ... A.WOO c 0.000 PRODUCnON " U .: 1.OD0 a 0.0 0.5 1.0 1.5 2.0 PRODUCnoN ...u 0.000 PRODUCnON ...U b: O.o00 PRODUCTION ...U c: 0.000 PRODUCTION ... U d 0.000 PRODUCnON ... U t O.O0 PRODUCnON ... 0 O.0D0 PRODUCnON ...0 a0.00D PRODUCnON ...0 b: 0.O0 PRODUCnON ... c:0O.O00 PRODUCTnON ...0 d O.ODD PRODUCnON ... 0 t O.DD DEMAND ... REPA0T a:O.00 DEMAND ... REPAaT r 0.000 DEMAND ... REPAGT b: O.0D0 DEMAND ... REPAOT c: 0.00D DEMAND ... REPAFT d: O.DD DEMAND ... COVT .:0.000 DEMAND .OVT &.: O. DEMAND ... OOVT b: 0.000 DEMAND ... OOVT c: 0.00D DEMAND ... GOVT d. 0.000 AUXIARY ... bulo AUXILARY ... uwq There is one specific assumption built into this sensitivity analysis that is not obvious from the cited documentation and this file. Government demands a good called G, which is produced using a number of inputs (which are final goods and services produced by other activities). The point estimate elasticity of substitution for this activity is zero, implying a Leontief production technology. This is shown above, near the end of the SSA file, by the line "PRODUCTION ... G s: 0.000". We would D-7 normally perturb such an elasticity by allowing it to also take on values of 0.5, 1.0, 1.5 and 2.0, as well as zero. Unfortunately we cannot do this here, since some of the input coefficients are negative. This is due to government expenditure including current consumption and investment together; the latter can be negative if, for example, the government runs down it's inventories in a good sufficiently in the base year. In any event, these negative coefficients imply that we are constrained to use a non-price-responsive production technology for this activity, since the derived input demands are not well-defined in such a case if they are price-sensitive. In other words, we are constrained by the economics of this set of benchmark expenditure data to not perturb this elasticity away from zero. Thus there are no distributional assumptions made for this line in the SSA file. The results of the sensitivity analysis are reported in Section 5 of the main text. D-8 Policy Research Working Paper Series Contact Title Author Date for paper WPS934 Public Hospital Costs and Quality Maureen A. Lewis July 1992 P. Trapani in the Dominican Republic Margaret B. Sulvetta 31947 Gerard M. LaForgia WPS935 The Pr^cautionary Demand for Boum-Jong Choe July 1992 S. Lipscornb Commodity Stocks 33718 WPS936 Taxation, Information Asymmetries, Andrew Lyon July 1992 C. Jones and a Firm's Financing Choices 37699 WPS937 How Soft is the Budget Constraint Evan Kraft July 1992 CECSE for Yugoslav Firms? Milan Vodopivec 37178 WPS938 Health, Government, and the Poor: Nancy Birdsall July 1992 S. Rothschild The Case for the Private Sector Estelle James 37460 WPS939 How Macroeconomic Policies Affect Daniel Kaufmann July 1992 D. Kaufmann Project Performance in the Social Yan Wang 37305 Sectors WPS940 Private Sector Approaches to Karen G. Foreit August 1992 0. Nadora Effective Family Planning 31091 WPS941 Projecting the Demographic Impact RodoHfo A. Bulatao August 1992 0. Nadora of AIDS Eduard Bos 31091 WPS942 Efficient Environmental Regulation: Arik Levinson August 1992 WDR Case Studies of Urban Air Pollution Sudhir Shetty 31393 (Los Angeles, Mexico City, Cubatao, and Ankara) WPS943 Burden-sharing among Official and Asli Demirgug-Kunt August 1992 K. Waelti Private Creditors Eduardo Fernandez-Arias 37664 WPS944 How Public Sector Pay and Gail Stevenson August 1992 PHREE Employment Affect Labor Markets: 33680 Research Issues WPS945 Managing the Civil Service: What Barbara Nunberg August 1992 P. Infante LDCs Can Learn from Developed 37642 Country Reforms WPS946 Retraining Displaced Workers: What Duane E. Leigh August 1992 PHREE Can Developing Countries Learn from 33680 OECD Nations? WPS947 Strategies for Creating Transitional Stephen L. Mangum August 1992 PHREE Jobs during Structural Adjustment Garth L Mangum 33680 Janine Bowen Policy Research Working Paper Series Contact Tltle Author Date for paper WPS948 Factors Affecting Private Financial Mohua Mukherjee July 1992 R. Lynn Flows to Eastern Europe, 1989-91 32169 WPS949 The Impact of Formal Finance on the Hans Binswanger August 1992 H. Binswanger Rural Economy of India Shahidur Khandker 31871 WPS950 Service: The New Focus in Hans Jurgen Peters August 1992 A. Elcock International Manufacturing and Trade 33743 WPS951 Piecemeal Trade Reform in Partially Glenn W. Harrison August 1992 D. Ballantyne Liberalized Economies: Thomas F. Rutherford 38004 An Evaluation for Turkey David G. Tarr