In recent years, sophisticated economic tools have been brought into service to help understand the effects of subsidies, particularly agricultural subsidies, on trade and welfare at the global level and within individual countries or groups of countries. Most of the large-scale efforts to date - by the World Bank, the OECD, the Institut national de la recherche agronomique (IINRA), the Carnegie Endowment, and a few independent analysts - have involved the use of computerized general equilibrium (CGE) models.
Although the specification of these models differ, they all share the same source of their information on subsidies: the database of the GTAP (Global Trade Analysis Project) consortium. The GTAP database, in turn, draws on data generated by the OECD (relating to its own member countries' farm support) and by WTO Members in their notifications of domestic support.
An important caveat of any recent CGE-based analyses that purport to examine the effects of "subsidy reform" on trade and welfare is that they consider only a sub-set of subsidies, namely subsidies to primary agriculture. Because the databases used for these models do not contain information on subsidies to energy, manufacturing, transport or even fisheries, the effects of such subsidies, or their reform, are not analyzed.
Most of the effects of trade reform that these models measure, therefore, are driven by changes in border measures, namely tariffs and tariff-rate quotas. When it is reported that only a small percentage of the benefits of multilateral trade liberalization generally, or from a specific trade deal, would stem from the elimination or reduction of subsidies, it is vital to understand that the outputs of the models largely reflect their inputs, at least as regards subsidies.
