The Effects of Trade Liberalization on the Industrial Sector of Iran and the Eurasian Economic Union Using a Multi-Regional GTAP Approach

The industrial sector plays an important role in creating job opportunities. Therefore, evaluating the effects of trade liberalization on the industrial sector is of particular importance. In this regard, this study investigated the effects of reducing importation tariff rates in the industrial sector of Iran and the Eurasian Economic Union on welfare and trade balance. These effects were analyzed based on the Global Trade Analysis Project (GTAP) model and version 10 of its database, in two scenarios (25% reduction and 50% reduction of tariff rates) using the GEMPACK software. Trade and specialization cause changes in the structure of production activities and consequently changes in wages and rents of production factors. Thus, the total effect of changing trade policies on the economic welfare index is measured. In addition to the above-noted factors, the volume of initial trade and initial tariff rates can affect the welfare rate. Considering that the tariff rate imposed by Iran is higher than Eurasia, the level of welfare is lower in Iran. Since some activities have various effects in different scenarios, they should be investigated closely to balance welfare. Tariff rate changes are also recommended to be done with high accuracy.