This paper demonstrates the importance of economic modelling as an input into formulating sound policy. Modelling and quantifying effects allows for a better understanding of the effects of policies across the economy. The paper uses a model of global trade to understand the effects of reducing tariffs in the context of a variety of trade agreements, concentrating on Asian integration.

Trade agreements have complex, interrelated consequences that modelling is designed to explain. For example, the modelling in this report shows that some of the effects of removing a tariff depend on whether partner economies compete in the same global markets or complement each other. Given the interdependence of the trade system, action on one trade route can also affect third economies. Global trade modelling of the type used in this paper clarifies and explains such effects.