Economic and Environmental Impacts of Import Barriers Reduction: A CGE Framework Analysis

To be accepted as a member of the World Trade Organization (WTO), Iran has to reduce import barriers including tariff and non-tariff barriers, expecting significant impacts on the Iranian economy. This study aims to investigate economic and environmental impacts of reducing import barriers. In this context, a computable general equilibrium (CGE) model was developed based on the Iranian social accounting matrix and decomposing total emission of the selected pollutants into energy use, production process, and final non-energy consumption emissions. The selected policy options are tariffication of non-tariff barriers, and implementing uniform tariffs of 14% and 4%. The results showed that selected policies makes GDP-rise while the general level of prices (CPI) tend to decreases. These policies also increase households overall welfares. In particular, the rich and urban income households will be much better than the others. Reducing import barriers also induces emissions reduction of the most of the pollutants; however a portion of energy-based and output-induced emission reduction is spoiled by increased emission caused from non-energy final consumption. These policies will change the output composition in favor of services, oil and gas, energy products, textiles as well as aquaculture and horticulture products.