Russian Roulette at the Trade Table: A specific factors CGE analysis of an agri-food import ban

Dudu, H., Boulanger, P., Ferrari, E. y Philippidis, G. (2016) Journal of Agricultural Economics, v67 (2), pp272-291

In the summer of 2014 Russia imposed a ban on most agri-food products from
countries enforcing Ukraine-related sanctions against Russia. We use a specific
factors computable general equilibrium (CGE) model to simulate the short-run
impact of this retaliatory policy. The baseline is carefully designed to isolate the
impacts of the ban on the European Union (EU), Russia itself and a selection of
key trade partners. The modelling of the ban follows a novel approach, where it is
treated as a loss of established trade preferences via reductions in consumer utility
in the Armington import function. Not surprisingly, the results indicate that Russia
bears the highest income loss (about €3.4 billion) while the EU recovers part of its
lost trade through expansion of exports to other markets. An ex-post comparison
between simulation results and observed trade data reveals the model predictions to
be broadly accurate, thereby validating the robustness of the modelling approach.

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