Aggregate indicators of trade distortions: Applications to the European Union common agricultural policy

The starting point of this research is the acknowledgment that the idea of a "trade distortion" index is not a simple, undifferentiated concept. It includes different elements that can be captured by different indicators. In Chapter 3 we provide a general taxonomy of different approaches followed in the literature. In particular, the study provides the description and interpretation of the following approaches: the Trade Restrictiveness Index (TRI) and the Mercantilistic Trade Restrictiveness Index (MTRI).; From the empirical point of view, the focus is on the European Union's Common Agricultural Policy (CAP). It represents an interesting case study, since its policies have undergone several important changes during the 1990s. The major changes introduced into the CAP in the last decade are discussed in Chapter 2.; In Chapter 4, we take the European Union's bound tariffs under the UR Agreement on Agriculture as the starting point, and attempt to measure how much liberalization in agriculture will be achieved by the end of the implementation period of the Agreement. Using the TRI and the MTRI as indicators, we assess the tariff structure chosen by the EU in terms of its welfare and market access changes. The effects of the actual UR Agreement commitments are compared with alternative tariff reduction schemes such as the 'Swiss formula' and a uniform reduction of tariffs.; As a consequence of two major CAP reforms implemented in the 1990s, there has been a shift in the policy mix in favor of direct payments, and away from market price support. An assessment of the impact of the CAP reform is provided in Chapter 5 through the use of a global applied general equilibrium modeling framework, provided by the Global Trade Analysis Project (GTAP). In this Chapter, we make use of a theoretically consistent trade distortion index for the purposes of reporting the results of our simulations. The main contribution is to extend and adapt the definition of the TRI, in order to take into account the consequences for the EU's terms of trade, and in order to use a money metric (rather than a compensation) welfare measure.