Measures of trade openness using CGE analysis

Using a computable general equilibrium (CGE) model of the world economy, a group of measures of trade openness are derived which lie on the unit interval and have a welfare interpretation. They are transformations of the Uniform Tariff Equivalent and have the property that national welfare increases monotonically with the measure of openness. An alternative measure is the ratio of the volume of trade in a restricted trade situation to that under the free trade situation. These measures are calculated for 14 regions of the world economy, using the Global Trade Analysis Project (GTAP) model. We find close correspondence between all the CGE measures, but the ranking of countries according to these measures differs substantially from that of the actual trade ratios.