Manual for the Tariff Reform Impact Simulation Tool (TRIST)
TRIST Manual
Using examples from TRIST Nigeria
www.worldbank.org/trade/TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Content
1. Relevance of TRIST
2. The trade model in TRIST
3. Data requirements and data
preparation
4. Importing data into TRIST
5. Making Simulations in TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
1. Introducing TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Introduction
• High demand from clients for World Bank support on analyzing
adjustment costs
• Countries face important trade policy decisions: Free Trade
Agreements, Customs Unions, unilateral tariff cuts, etc
• Concerns about short term adjustment costs in terms of fiscal
revenue, domestic output and employment losses often slow
down tariff reforms.
• Better understanding of adjustment implications can contribute
to design of tariff reform and to discussion of policies to
minimize adjustment costs.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Common Problems with Modeling Adjustment
Costs of Tariff Reform
• Not flexible enough to deliver a timely response to changing
negotiation proposals or reform plans
• Failure to take into account tariff exemptions (up to 50% in many
countries)
• Revenue estimations focused on tariffs, ignoring VAT and
surcharge tax revenue
• High level of aggregation of both input data and results reduces
precision of estimates and policy relevance of results
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Features of TRIST
• Uses import and revenue data at the transaction
level
– Includes not only collected tariff but also collected surcharge and VAT
– Exemptions taken into account
– non-ad valorem tariffs can be taken into account
• Is flexible enough to respond to changes in trade
policy scenarios
– Any trade policy scenario can be incorporated
– results are available immediately
• Simple, transparent and allows for the
incorporation of local knowledge
– TRIST is set up in excel, all formulas and steps taken are visible to user
– Simple and intuitive modeling and assumptions
– Ongoing stake holder dialogue to improve according to clients‟ needs
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
What TRIST can do…
•
•
•
Estimate short-term tariff, VAT and excise revenue and
import value changes at tariff line level
Calculate the resulting changes in applied tariffs and prices
by sector
Give an indicative idea of the magnitude of output and
employment losses by sector (the quality of results will
depend on availability of detailed data)
All this is done in a partial equilibrium framework, which
means that importing is analyzed in isolation from the
rest of the economy and no long term effects such as
growth or reallocation of production factors are taken
into account.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
This is how TRIST works:
CUSTOMS: Data on
imports and tariff,
excise and VAT
revenue by product
and trading partner
NATIONAL
STATISTICS: Data
on domestic output
and employment by
sector
USER: Definition of
tariff reform
scenarios and model
parameters
Aggregation Tool:
Single Excel file that
allows defining
country and product
groups
Simulation Tool:
A single Excel file
containing all data,
tariff reform definitions
and a simple partial
equilibrium model
of importing
RESULTS:
• Imports by product
and trading partner
• Tariff, surcharge
and VAT revenue by
product and trading
partner
• Applied tariff rate
and price changes by
sector
• Domestic output
and employment by
sector
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Where we stand
• TRIST have been developed for the following countries:
Tanzania, Ethiopia, Zambia, Madagascar, Malawi, Tunisia,
Morocco, Nigeria, Mauritius, Bolivia, Albania,
Mozambique, Kenya, Seychelles, Jordan, Syria (more to
come)
• Existing TRISTs can be downloaded free of charge at
www.worldbank.org/trade/TRIST
• We have offered hands-on training on how to use TRIST
in Tanzania (twice), Zambia, Madagascar, Mauritius,
Malawi, Ethiopia, Syria (twice), Seychelles, Tunisia and
Bolivia
• We are constantly working to further improve TRIST and
respond to the feedback we receive
• So far, TRIST will soon available in French and Spanish
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
2. The trade model in
TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
4 calculation steps
•
•
Step 1: Price change for each good and exporter
Step 2-4: Model the import response of trade flows. Example: preferential
reduction in the tariff on imports from country A
Exporter substitution effect: Imports from other countries are replaced with
Imports from country A following a reduction in the domestic price of imports from
country A. Total imports remain unchanged. The size of the effect is determined by
the exporter substitution elasticity.
Domestic substitution effect: Domestic production is replaced with imports following
a reduction in the average price of imports. Total domestic consumption remains
unchanged. The size of the effect is determined by the domestic substitution elasticity.
Demand effect: Total consumption increases following a reduction in the average
domestic price. The size of the effect is determined by the demand elasticity.
FINAL RESULTS
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Structure of the trade model in TRIST
Demand
Effect
Total demand for product i
Sales by domestic firms
Country A
Country B
Domestic
Substitution
Imports
Country C
Country D
Exporter
Substitution
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Assumptions
• NO substitution between products i, j, k, …
(modeling one market at a time)
• Armington assumption: Imperfect substitution
between imports of product i from trading
partners A, B, C, …
• Modeling based on elasticities (percentage
changes): Zero trade flows remain zero (no
market entry of new trading partners)
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
i) Price change
• Price changes: Domestic price = World market price +
all domestic taxes.
• Tax calculation varies between countries. In Zambia:
• Tariff = T% of cif import value
• Excise = EXT% of [cif import value + tariff]
• VAT = VAT% of [cif import value + tariff + excise]
• World market price, EXT and VAT remain unchanged
• Percentage change in domestic price of imports for
each good from each trading partner is calculated as
(country and product index omitted):
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
i) Price change – numerical example
• Example: Initial tariff of 30% with country B and A. Tariff for B is
brought to 0. Excise of 20% and 10% VAT rate (remain unchanged).
Country
B
A
Initial tariff
25%
25%
Excise rate
20%
20%
VAT rate
10%
10%
New tariff
0%
25%
Old domestic /
world price
(1+25%)*(1+20%)*(1+10%) = 1.65 (1+25%)*(1+20%)*(1+10%) = 1.65
New domestic /
world price
(1+0%)*(1+20%)*(1+10%) = 1.32
(1+25%)*(1+20%)*(1+10%) = 1.65
% import price
change
(1.32-1.65)/1.65 = -20%
(1.65-1.65)/1.65 = 0%
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
Import response is determined in 3 step procedure
1. exporter substitution effect
2. domestic substitution effect
3. demand effect
each of which requires an assumption regarding an
elasticity –determines the magnitude of the impact of
a change in relative prices
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
ii) exporter substitution
• Exporter substitution: Imports from country A are
replaced with imports from country B if the relative
price for imports from country B falls due to tariff
reduction
• Exporter substitution elasticity: The change in
imports from country B relative to imports from
country A if the relative price for imports from country
B decreases by 1% relative to the domestic price for
imports from country A
• Total imports remain the same, but imports from
country B increase at the expense of imports from
country A.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
ii) exporter substitution – numerical example
•
Assumption: Exporter substitution elasticity Ees=2
Imports from B
Import from A
Total Imports
Initial product
value
100
100
200
Price change
by exporter
-20%
0%
-
Intermediate
step*
100+100*(-Ees)*
(-20%) = 140
100+100*
(-Ees)*0% = 100
240
Value after
exporter
substitution
140*200/240 ~ 117
100*200/240 ~ 83
200
*) This is an intermediate calculation step to keep formulas simple
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
iii) domestic substitution
• Domestic substitution: Domestic production is replaced
with imports (from all trading partner) if the average
domestic price of imports decreases
• Average domestic price of imports: Import price
changes by trading partner weighted by their import share
• Domestic substitution elasticity: Percentage change in
consumption of imported goods relative to domestically
produced goods following a one percent change in the
average domestic price of imports relative to the price of
domestically produced goods.
• Total domestic consumption remains the same but imports
increase at the expense of domestically produced goods.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
iii) domestic substitution – numerical example
•
•
Assumption: Domestic substitution elasticity Eds=1
Note that if domestic production is zero, there is no change in imports in
this step.
Imports from B
Imports from A
Domestic
Production
Total
Consumption
Product value after
exporter substitution
117
83
200
400
Price change by
exporter
-20%
0%
-
-
Average domestic price
change of imports
100/200*(-0.2)+
100/200*(0) = -10%
100/200*(-0.2)+
100/200*(0) = -10%
-
-
Intermediate step*
117+117*(-Eds)*
(-10%) ~ 128
83+83* (-Eds)*
(-10%) ~ 92
200
420
Value after domestic
substitution
128*400/420 ~ 122
92*400/420 ~ 87
200*400/420 ~
190
400
*) This is an intermediate calculation step to keep formulas simple
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
iv) demand effect
• Demand effect: Demand for the product (both imported
and domestically produced) increases after a reduction
in the average domestic price of the good.
• Average domestic price: Average of average
domestic price of imports and price of domestic
production (constant in TRIST) weighted by their share
in total domestic consumption of the product
• Demand elasticity: Percentage change in total
demand (regardless of origin) for the good following a
one percent change in the average domestic price.
• Total domestic consumption increases
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
iv) demand effect – numerical example
•
Assumption: Demand elasticity Ed=0.5
Imports from B
Imports from A
Domestic Production
Total
Product value after
domestic substitution
122
87
190
400
Average domestic price
change of imports
-10%
-10%
-
-
Average domestic price
change
200/400*(-10%)+
200/400*(0%) = -5%
200/400*(-10%)+
200/400*(0%) = -5%
200/400*(-10%)+
200/400*(0%) = -5%
-
Demand effect
122+122*(-Ed)*
(-5%) ~ 125
87+87* (-Ed)*
(-5%) ~ 89
190+190*(-Ed)*
(-5%) ~ 195
410
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
How it works – the trade model in TRIST:
summary
•
Breakdown of effects if tariffs are reduced with country B but not with
country A
Imports from B
(tariff reduction)
Exporter substitution
effect
Domestic substitution
Effect
Demand effect
Total effect
Imports from A
(no tariff reduction)
Domestic Production
↑
↑
↑
↓
↑
↑
↓
↑
↑
In theory ambiguous
(depends on
elasticities), in
practice almost
always
In theory ambiguous
(depends on
elasticities), in
practice almost
always
↓
↓
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
3. Data requirements and
data preparation
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data requirements
• The following data is required for all import transactions in the latest available
year. Typically, this data can be obtained from the customs authorities.
HS
code
Count
ry of
origin
CPC
Import
value
Tariff
paid
Tariff
exempt
ed
Excise
tax paid
Excise
tax
exempt
ed
VAT
paid
VAT
exempt
ed
Other
taxes
paid
Other
taxes
exempt
ed
01051110
USA
40000
100
10
0
0
0
15
0
0
0
39252000
BRA
400GM
500
100
0
0
0
75
0
0
0
42021210
DEU
90000
1200
0
120
0
0
0
180
0
0
11029000
ZMB
40000
400
40
0
80
0
60
0
0
0
…
…
…
…
…
…
…
…
…
…
…
…
The hscode
(typically 8 digits,
sometimes more)
identifies the type
of product
The Customs Procedure Code (CPC)
identifies the customs regime under
which a good enters the country.
These codes are necessary to identify
imports that have to be removed from
the dataset during the data cleaning
procedure. You will need a table that
explains the meaning of these CPC
codes (from customs) as they differ
from country to country.
Collect information on all taxes
applied at the border and exemptions
granted for these taxes. If information
on exemptions is not available, it can
be calculated as:
Exemptions = [tariff rate] * [import
value] – [tariff paid]
(note that for excise, the tax base is
often the tariff inclusive value of
imports, and for VAT, the tariff and
excise inclusive value of imports)
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation
Once the data has been collected, three preparation steps
have to be carried out:
• Cleaning: Based on the CPC codes, delete trade flows
that do not enter the home market in free circulation
• Checking: Search for possible data entry errors and
consistency in the raw data
• Formatting: Manipulate the data into the format required
for TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - cleaning
• Not all goods that enter a countries territory actually
become part of its market – for example, goods in transit,
warehousing or EPZs
• Government imports and imports by foreign embassies
or international organizations also enter the country, but
do not become part of the home market as they are for
the exclusive use of the public sector
• Typically, no tariffs or other taxes are paid on these
goods, so including them would lead to an
overestimation of exemptions and an underestimation of
protection of the domestic economy.
• Thus, we will use the CPC codes to identify such imports
and delete them from our dataset
• For users that are not familiar with customs procedures,
the easiest solution may be to ask customs to perform
this step when downloading the data from the customs
computer
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - cleaning
HS
code
Coun
try of
origin
CPC
Import
value
Tariff
paid
Tariff
exempt
ed
Excise
tax
paid
Excise
tax
exempt
ed
VAT
paid
VAT
exempt
ed
Other
taxes
paid
Other
taxes
exempt
ed
01051110
USA
40000
100
10
0
0
0
15
0
0
0
39252000
BRA
400GM
500
100
0
0
0
75
0
0
0
42021210
DEU
90000
1200
0
120
0
0
0
180
0
0
11029000
ZMB
40000
400
40
0
80
0
60
0
0
0
…
…
…
…
…
…
…
…
…
…
…
…
In this example with CPC codes from Mauritius customs, 400GM refers to government imports and
90000 refers to imports into EPZs. These observations would be dropped. CPC code 40000 refers to
regular imports for home consumption, so these observations would be kept in the dataset.
CPC
description
40000
DIRECT IMPORT OF GOODS FOR HOME CONSUMPTION.
400GM
DIRECT IMPORT OF GOODS BY GOVT AND PARASTATAL BODIES.
90000
IMPORT OF RAW MATERIALS BY EPZ ENTERPRISES
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - cleaning
In this example, select CPC code 400GM to show all
government imports. Then delete all the observations
that are being displayed. Remove the filter by clicking
on ‘(All)’ in the dropdown menu.
When processing the data in Excel, a useful way to identify and delete observations
with a certain CPS code is the „filter‟ option. To activate the filters, go to „data‟ ->
„filter‟ -> „auto filter‟. Then, click on the dropdown menu that appears in the field with
the CPC codes. This will allow you to filter your data to display only observations
with a certain CPC code. One after the other, choose the CPC codes you want to
drop and delete the observations with these CPC codes. It is also possible to
perform the cleaning procedure in other software packages such as Access.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - checking
•
•
•
•
Before working with the rawdata, we have to make sure that it does not contain errors
or inconsistencies that are significant enough to impact TRIST results. A good
approach is to check for extremely large values for imports and tax revenues.
For imports, start by sorting the data by the size of import flows to identify extremely
large flows (say, any flow that exceeds 1% of total imports). For all large flows, verify
based on common sense and any available additional information (eg. internet
research, confirmation with customs) whether a large flow is likely to be a data entry
error.
For tax, excise and VAT revenue, construct
 Applied tariff rate ([tariff revenue] / [imports])
 Statutory tariff rate ([tariff revenue + tariff exemptions] / imports)
 Applied excise rate (typically [excise revenue] / [imports + tariff revenue])
 Applied VAT rate (typically [VAT revenue] / [imports + tariff revenue + excise
revenue]).
The tax base for excise and VAT can vary between countries (check with customs
how excise and VAT are applied). Then make sure that the applied tax rates are in
line with the country‟s tariff, excise and VAT regime.
The following slides will give some examples to illustrate these checking steps
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - checking
Confirm the plausibility of all
import flows that account for
more than 1% of total imports.
In this case, only one
observation has to be
investigated.
This example shows import data for Burundi. The dataset was sorted by the value
of imports and a variable was constructed that shows the share of each trade flow
in total imports. Only one trade flow has an import share of more than 1%. A good
first step to verify whether this might be an error is to look up the HS code*) to
determine what kind of product is being imported. In this case, code 10051000
refers to corn. A quick internet search for „food‟ „Burundi‟ „2007‟ confirms that
following a bad harvest, Burundi had to import significant quantities of food from its
neighboring countries in 2007. Thus, this large import flow is plausible and can be
kept in the dataset. Otherwise, it would have to be deleted.
*) To find the exact definition of an HS codes at the 8 or 10 digit level, refer to the customs schedule of the country you are
working with. However, HS codes are harmonized for the first six digits, so a more aggregate definition can be found by
looking up the first six digits of the code at any online sources for HS codes, eg.
http://www.foreign-trade.com/reference/hscode.htm
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - checking
Applied tariff
rates way above
the highest rates
in a countries
tariff schedule
indicate a
problem with the
revenue data.
The next step is to construct a variable for applied tariff rate (tariff revenue /
imports). Then, sort by this variable to identify outlier values. In this case, a number
of observations have applied tariff rates of more than 1000%, way above the
highest advalorem tariff rate applied by Burundi tariff schedule (30%). A possible
reason for very high (advalorem) applied tariff rates can be the presence of a
specific tariff (that is, a tariff that is applied per unit of an import rather than on its
value) on very low value items. At this point, it is crucial to verify with customs
whether there are indeed specific tariffs on the goods in question or whether these
observations reflect data entry errors. In case of doubt, it is preferable to drop such
observations as they might otherwise distort the TRIST results.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - checking
Applied tariff
rates way above
the highest rates
in a countries
tariff schedule
indicate a
problem with the
revenue data.
It is also important to check the information on tariff exemptions by constructing the
statutory tariff rate ([tariff revenue + tariff exemptions] / imports). Again, sort by the
new variable to identify outlier values. In the example shown, some statutory rates
appear to be outliers even though the applied rates look normal. If this can not be
sorted out with customs, it would be reasonable to either drop the observations
entirely or adjust the exemption data for these observations to zero.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - checking
In this example with
data from Mauritius, the
applied VAT rate for all
observations is equal to
or below 15%, which is
the official VAT rate in
Mauritius, so no
adjustments have to be
made.
Repeat the same procedure for the applied excise and VAT rates. It is important to
find out from customs what exactly the tax base for each tax is, ie: Does it include
tariffs? If so, is it based on the applied or the statutory tariff (ignoring exemptions)?
Does it include any other taxes?
The standard version of TRIST assumes that excise tax is applied on import value
+ tariff revenue and VAT on import value + tariff revenue + excise revenue. If this is
different in your country, please contact the TRIST team (see contact details on
the first slide) for an adjusted TRIST version.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - formatting
Finally, the data has to be formatted to fit into TRIST. We will need five tables:
Albania
01011000
American
Samoa
Andorra
120
320
01019000
01021000
Angola
310
…
One column for each trading
partner. It is crucial that
trading partners (and their
order) are exactly the same in
all five tables.
340
…
One row for each product
imported, identified by the
HS code. It is crucial that
these codes (and their
order) are exactly the
same in all five tables.
The cells contain totals for the following five variables for each country and
product (a blank indicates zero total). Make one table for each variable:
 Imports
 Collected tariff revenue
 Statutory tariff revenue (=collected tariff revenue + exemptions
 Excise revenue
 VAT revenue
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - formatting
One convenient way to construct these tables is to import the data into MS Access
and use the „cross tab‟ query function (you also can use any other database
program you are familiar with). The following is an example:
From the original dataset, the following information was imported into MS Access:
 HS code
 Country of origin
 Import value
 Collected tariff revenue
 Statutory tariff revenue (=collected tariff revenue + exemptions)
 Excise revenue
 VAT revenue
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - formatting
After importing the data, create a new query based on the imported data table, then
under „query type‟ select „crosstab query‟
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - formatting
For the first table, group by „HScode‟, use „Origin‟ as column headings and the sum
of „Imports‟ for each HScode and trading partner to populate the data cells.
Choose ‘Imports’ as
the third variable.
Select ‘sum’ and
‘value’: This tells
Access populate the
cells with the sum of
imports of each
product (identified by
‘HScode) from each
trading partner
(identified by
‘Origin’).
Choose ‘HScode’
as the first
variable. Select
‘group by’ and
‘row heading’:
This tells Access
to use this
variable to
identify the
products in the
rows.
Choose ‘Origin’ as the second variable. Select ‘group
by’ and ‘column heading’: This tells Access to use this
variable to identify the trading partners in the columns.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation - formatting
Switch to the „datasheet‟ view to access the resulting query – it should look like the
one below. You may want to copy and paste this data back to Excel to have it ready
for importing into TRIST. Repeat the procedure with collected tariff revenue,
statutory tariff revenue, excise revenue and VAT revenue as the third variable
(„HScode‟ and „Origin‟ remain as they are).
In this case, total imports of
product 02012000 from
trading partner AU (Australia)
sum up to $984,953.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
4. Importing data into
TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
•
•
•
Once the data has been cleaned and brought into the appropriate format, we
can import it into TRIST.
For this, we use the TRIST data aggregation tool – this serves as an interface
between the raw data and the actual TRIST that allows you to group the data
by trading partners and to define subsets of products to carry out simulations
on partial datasets.
Before we start, check one more time that your data for imports, collected tariff
revenue, statutory tariff revenue, excise revenue, and VAT revenue is
organized as a matrix by trading partner and hscode as shown below and that
the order of hscodes and trading partners is the same in each dataset.
Albania
01011000
American
Samoa
120
…
Angola
320
01019000
01021000
Andorra
310
340
…
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
•
•
Next, open the “TRIST data aggregation tool - TEMPLATE”. In the opening
dialogues box, choose to enable macros. You may need to adjust your macro
security settings to „low‟ or „medium‟ under „tools‟ -> „options‟ -> „security‟ ->
„macro security‟ to be able to run the macros in this tool.
If you have done so, the “Data Imports Assistant” should open automatically.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• We are now in the “Data Imports Assistant” that will take us through
the process of uploading the data.
• We begin by filling in some basic information and click “OK”.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• This completes the first step (“Enter Data Information”) of the
procedure
• Let us continue with the second step by clicking on “Enter Tax
Information”
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• The next window that appears asks us to define the taxes collected
at the border of the country of interest. Please choose the name of
each tax and the tax base definition from the drop-down menu.
When you are finished, press “OK”.
• The below example shows how excise duty and VAT are defined in
most countries
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• Back in the main menu, we click on “Import Data” and are then
asked which data set we would like to update first.
• The next step is thus to import the data we have previously cleaned,
i.e. the data sets on imports, statutory tariff revenue, collected tariff
revenue, trade tax 1 revenue and trade tax 2 revenue.
• Let‟s choose “Trade Imports” first.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• We thus begin with the “imports” data. Open the file containing the
cleaned and organized raw data on imports and select the entire
data set, including the HS codes as well as the header row with the
trading partner names.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• The “Data Import Assistant” window will remain open while you
select and copy the data set in the background.
• Once you have copied the selected data, press “Click here”. This
tells TRIST to upload the “imports” data set. This process may take
some time. Please be patient and wait until a message box appears
informing you about the success of the data upload.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• The message box below tells us that the data import has indeed
been successful. The green arrow in the data import window has the
same meaning. Press “OK” in the pop-up and “Close” in the data
import window to get back to the previous menu.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• Please follow precisely the same procedure for the data sets for
statutory tariff revenue, collected tariff revenue, excise revenue and
VAT revenue (and the data for a third tax, if you chose “YES” in the
first window of the import assistant).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• The option “EPA Exclusion List” can be very useful if you would like
to define a tariff reform scenario that includes all but a selected list
of products. An example is an Economic Partnership Agreement
(EPA) with the European Union (EU) from which a list of products is
excluded.
• If you do have such a list, click on the button, open the data file
containing the list of HS codes. Select the list, copy it and press
“Click here”.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• If you are finished importing data, just press “Close”. In the data
import assistant press “Finish”. This completes the data import
process. The following window tells you whether you have indeed
completed each step successfully.
• If you see a “Missing” somewhere, go back and re-do the respective
step in the data import assistant . If not, press “OK”.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing data into TRIST
• Your “Data Info” sheet should now look similar to this
• Please familiarize yourself with the information on the left and the
right of the worksheet. Double-check that the basic information, the
tax definitions and the descriptive statistics are as expected. If not,
you might want to go back and check for whether you have done the
data cleaning and formatting correctly.
• The next step is to define country groups.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Define Country Groups
•
•
•
•
•
You should define country groups that are of interest in the context of the
trade policy scenarios you have in mind (e.g. EU, GAFTA, Turkey).
Each trading partner country must belong to exactly one group!
Countries that you do not assign to any group automatically become part of
the group “Rest of the World”.
At the bottom of the excel file, choose the “Country Groups” worksheet.
Within it, click on “Manage Country Groups”
Select the names of the countries to be included in the first group by simply
clicking on them.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Define Country Groups
•
Once you have selected all relevant countries, click “Add” and “Save
Group”. Finally, include a name and description for the group and press
“OK”.
•
In the background of the window, you should see a new column appearing
containing the name of the group you have created and the names of the
countries included in it.
Proceed like this to define all country groups that are interesting in your
context. When you are finished, press “Close” to close the “Country Groups
Management Panel”. TRIST will then regroup the data.
•
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Select Product Groups
•
The last step of the data import is selecting the groups of products to be
included in the TRIST simulation. At the bottom of the page choose the
“Product Groups” worksheet.
•
A “1” in the column belonging to a given product indicates that the product
belongs to that group. A “1” in the column “Overall Selection” indicates that
a product is presently selected to be included in the TRIST simulation.
Notice that some products belong to multiple groups (groups overlap).
The default is to include all product groups (By default, “Include” is chosen
from the drop-down menu above the “All Products” column).
•
•
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Select Product Groups
• For the scenarios covered in this training, we will always work with
the entire dataset. You can simply click on “Apply Selection” to
finish the data import process.
• However, there may be cases where you are only interested in a
subset of your data. In this case, you can save time and make Excel
run faster if you only import the required products into TRIST. You
can either exclude pre-defined product groups, or define your own
groups to customize the process.
• Let us go through an example:
Example: suppose you want to exclude all intermediate
goods except those that are also petroleum products.
Simply choose “Exclude” from the drop-down menu
above the “Intermediate Goods” column and “Include”
from above the “Petroleum Products” column.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Select Product Groups
• Having done so, notice the change in the column “Overall Selection”
on the left hand side. It indicates a “1” for all petroleum products
whereas the cell is empty for all other Intermediate products.
• Hence, all intermediate products except Petroleum products are now
excluded. To finish the process, simply click on “Apply Selection”
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Finishing the data import
• Having clicked on “Apply Selection”, you are automatically taken to
the worksheet “TRIST Selection”. Press “OK” in the pop-up window
telling you that the “Tariff line filtering is completed”.
• This worksheet contains the import, tariff and trade tax data you
previously cleaned and uploaded. For each of the country groups
you defined, the data is aggregated across all included products.
• The data import is now finished. Please make sure that you save the
file now. Finally, go back to the worksheet “Data Info” and check all
the information for errors one last time.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
A final check of the data
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Hint: Protection of Sheets
•
In the current version of TRIST, most worksheets are protected, which means
that some cells (like those containing formulas or descriptions) can not be
altered.
•
This is not intended to prevent users from making changes in these cells if they
wish too. It is just a reminder that these cells are related to the basic functioning
of the model and you should only change them if you are sure that you know
what you are doing.
•
To unprotect any worksheet, click on „tools‟ -> „protection‟ -> „unprotect sheet‟
•
Excel will ask for a password. This password is: TRIST
•
The password ist case sensitive
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
5. Making Simulations in
TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Opening the TRIST simulation tool
• We are now ready to open the actual simulation tool and define and
apply tariff reform scenarios
• You may want to close the data aggregation tool at this point in
order to give Excel more memory in working with the actual
simulation tool
• Let‟s open the “TRIST simulation tool template” and save it right
away.
• Hint: Please make extensive use of the Help File that is supplied
together with the tool.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Opening the TRIST simulation tool
• The first worksheet that opens when you open the simulation tool is
“TRIST”.
• Now, please click on “Control Panel”.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Customizing TRIST
• The “Control Panel” is the heart of TRIST. It allows you to upload
data from the aggregation tool, to customize TRIST according to
your needs and to define the policy scenarios you want to apply.
• A natural first step is to upload data. Please choose “Import Trade
and Revenue Data” and select the data aggregation tool from the
folder you stored it in.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Importing Data
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If the data was imported successfully, you should see the country groups
you previously defined under the heading “2. Tariff Change Scenarios”
Let‟s close the control panel for now and have a look around in the
worksheet.
To the right of the country groups you should see “No tariff change” under
the heading “Selected Scenario” . This implies that the current scenario is to
leave all tariffs as they are. If you click on any of the cells saying “No tariff
change”, you are in the drop-down menu that allows you to choose any
scenario that has previously been defined.
TRIST allows you to simultaneously apply separate reform scenarios for
each country group.
Below the reform scenarios you can see the elasticities for the trade model,
which you can customize in the “Control Panel”, as well as a drop-down
menu which tells you whether production data is taken into account or not.
In the case of Nigeria, production data is not available.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data Successfully Imported
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Worksheets
Let us briefly discuss the content of the remaining worksheets in TRIST
1. “Results” summarizes the most important results from the reform
scenario currently applied .
2. “Trade Data” contains the data imported from the aggregation tool.
3. “Tariff and Price Change” computes the price change on the basis of
the changes in tariff and tax rates.
4. “Exporter Substitution”, “Domestic Substitution” and “Demand Effect”
present the resulting detailed changes in imports and production
from each calculation step in the trade model.
5. “Results-Details” and “Results-ISIC” contain detailed results at the
product and at the sector level respectively.
6. “Product Groups” presents the product group selection made in the
aggregation tool
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Managing Elasticities
• Let‟s go back to the worksheet “TRIST”
• If you click on “Control Panel” and “Manage Elasticities”, you can
choose the elasticities for the trade model underlying TRIST.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Managing Elasticities
•
•
Notice that TRIST also allows you to choose from two different sets of
estimated elasticities that are product specific (SMART or WB paper)
Please check the box for “Use adjustment factor” if you would like
elasticities to differ between country groups and products. In case you do,
go to the worksheet “Raw Data”. There you can choose a value by which
the elasticity is to be multiplied for each product and country group. This
option gives you full flexibility in defining your elasticities.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Defining Tariff Reform Scenarios
• Once the elasticities have been defined, we are ready to define the
tariff reform scenarios we are interested in. In the “Control Panel”
choose “Manage Tariff Reform Scenarios”
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Defining Tariff Reform Scenarios
•
•
•
In order to define a tariff reform scenario you need to tell TRIST what will happen to
the tariffs of every product
You may for instance want to cut tariffs on “Petroleum products” to zero and leave
tariffs on the “Remaining products” as they are. The scenario thus consists of two
sub-scenarios, one for “Petroleum products” and one for the “Remaining products”.
For each sub-scenario, you have to go through a number of steps to define the
change.
1. Choose a product group you would like to apply a separate tariff scenario to by
simply choosing from the “Affected Products” drop-down menu
2. Choose a type of tariff change to be applied as well as the corresponding parameter.
Some examples:
- “Fixed value” with parameter “0” implies that all tariffs are set to zero
- “Linear cut” with parameter “10” implies that all tariffs are cut by 10%
- “Cap value” with parameter “10” caps all tariffs at 10%
- “Swiss formula” with parameter applies a swiss formula cut
3. Choose the “Tariff base” to which the change is to be applied. Example: a “Linear cut”
of 10% to the Statutory tariff implies that the new tariff is equal to the statutory tariff
cut by 10%.
4. Finally, click on “Add Definition to the scenario”. Then save the scenario.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 1: Applying Statutory Rates
• As a grounds of comparison, it is often interesting to see the
implications of applying statutory instead of actually collected tariff
rates. In effect, this implies cutting all tariff exemptions to zero.
• To define such a scenario, go to “Manage Tariff Reform Scenarios”
and choose
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 1: Applying Statutory Rates
• Save the scenario by choosing a name and a description for it. Here,
we choose “Statutory Rates” as its name.
• We have successfully defined the scenario and can now go ahead
and apply it. Go to the “TRIST” worksheet and choose
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 1: Applying Statutory Rates
• The “Results” worksheet should now show
you the projected impact of applying the
scenario. You should see imports fall and
revenue increase. The applied tariff average
Should have increased as well.
• Notice that the worksheets “Results Details”
and “Results ISIC” contain the results detailed
by product and sector.
• As a next step, let‟s save the results. In the
control panel, go to “Manage Simulation
Results” and save the current scenario by
giving it a name and a description.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 2: An EPA with the EU
• Let‟s now look at the impact of an EPA with the EU. This requires
setting all tariffs on imports from the EU to zero. At this point we
assume that no products can be excluded from the EPA.
• We can simply use the “Full Free Trade” scenario that is included in
TRIST by default. Choose the scenario “Full Free Trade” for the
country group “EU” and choose “No tariff change” for the remaining
trading partners.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 2: An EPA with the EU
• Notice that the EPA results in a loss in tariff revenue of almost 29%
and in a loss in overall trade tax revenue of almost 18%. The applied
import weighted average tariff falls to 4.8%
• In the left column you see the results for the current scenario, in the
right column the ones we just saved. Let‟s save the results for the
current scenario under the name “EPA”
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 3: An EPA with the EU – Excluded
Products
• The projected revenue loss resulting from the EPA is quite
substantial.
• But notice that Art. 24 of the GATT only requires to liberalize
“substantially all trade”. In reality, not all trade will be liberalized, but
some share of imports, typically 20%, can be excluded. In the
absence of a list of sensitive products, we will have to help
ourselves with some assumptions. One would be complete
liberalization, which we have already modeled.
• The opposite extreme (in terms of revenue impact) would be to use
the sensitive product list to minimize revenue losses, that is, we will
exclude those 20% of EU imports for which TRIST predicts the
highest revenue change under an EPA.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• Go to the worksheet „Results-Details‟. We can use the information
on imports and revenue changes for each product to identify
products with high revenue losses.
• The easiest way to analyze this data is to copy it into a separate
spreadsheet. In this case, the information we need is imports from
the EU (pre-EPA) and total revenue change under an EPA. We
should also copy the column that contains the hscodes to identity
products.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Copy the entire ‘hscodes’ column from the ‘detailed results’ worksheet into a
new Excel file. Make sure to use the ‘paste special’ -> ‘values’ function.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Also copy pre-reform imports from the EU and the change in total tax revenue
(tariffs, VAT, excise) due to the reform.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
After labeling the columns, the
result should look like this.
You should delete the ‘TOTALS’
row and the blank rows at this
point.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• Given that we can only exclude 20% of total import value from the
EU, we are looking for products were revenue losses are high
relative to the import value from the EU. Thus, we add a column that
calculates the revenue loss / imports from EU
After entering the column heading,
start in the first data field of the
column (D2) and enter the formula:
=C2/B2
C2 is the data field with the revenue
change for this product, B2 contains
imports from EU. Then, fill out the
cells all the way to the bottom of the
column (double-click on the little
rectangular on the lower right hand
side of the selection frame).
For rows with 0 imports from the
EU, you will see an error message
(‘#DIV/0!’).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
•
The next step is to sort the dataset by our newly created variable to identify
those products that have the highest ration between revenue change and
imports from the EU.
Select all your data. Then, click on ‘data’ and ‘sort…’. In the window that opens
select the newly defined variable, ‘revenue change / EU imports’ under ‘sort by’
and click ‘OK’.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
In this view, after sorting by the
revenue change / EU imports,
we added a column that shows
the cumulative share of EU
import value and then scrolled
down to find the cut-off line for
the 20% import value criterion.
All products above the cut-off
line would be treated as
sensitive products.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 3: An EPA with the EU – Excluded
Products
•
It is now simple to import the 20% of trade that are most revenue
sensitive into TRIST.
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Open the “TRIST data aggregation tool” workfile and open the
“Data imports assistant”.
•
Navigate using the “Next” button until you arrive in the “Optional
step: EPA exclusion list” window.
•
Simply select and copy all hscodes in your worksheet for which the
value in the column “cumulative EU imports” is smaller than 0.2
(20%).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 3: An EPA with the EU –Excluded
Products
•
Now, simply click on “Click here”. The newly defined EPA exclusion
list will be imported.
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Please click “Finish” and save the workfile.
Now, open the “TRIST Simulation” file again and open the “Control
Panel”. Please choose “Reset TRIST simulation file” first to delete
all of its contents. Then choose “Import Trade and Revenue Data”
and click on the aggregation tool as a source of the data.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 3: An EPA with the EU –Excluded
Products
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•
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We are now ready to define the intended scenario: an EPA with the
EU from which 20% of trade are excluded according to revenue
considerations.
Let‟s choose “Manage Tariff Reform Scenarios” in the control panel
We choose to apply no tariff change to the products in the EPA
exclusion list.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 3: An EPA with the EU –Excluded
Products
•
For the remaining products we reduce all tariffs on imports with the
EU to zero
•
Please save the scenario as “EPA with exclusion list”. Closing the
control panel, we are ready to apply the new scenario (see next
slide).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Example 3: An EPA with the EU –Excluded
Products
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You may want to have a look at the “Results” worksheet once the
scenario has been applied. Notice that the loss in tariff revenue has
fallen to 14% while the loss in overall trade tax revenue is down to
9%.
This little exercise shows that an informed choice of sensitive
products can greatly attenuate the revenue impact of a PTA.
Exercise: see what happens if 40% of trade can be excluded