The Global Trade Model (GTM) will consist of a set of Regional Component Models (RCMZ and a Linkage System. The interface between these submodels is depicted schematically in Figure 14. Operating through this interface, the GTM will pro- vide information on world market prices, trade flows, and pro- duction and consumption potentials within each region. A more detailed picture of the relationship between the Forest Trade Database CFTDB), the Regional Component Models and the Linkage System is given in Figure 35. It is evident that the decompo- sition of structural change into supply-related, demand-related, and link-related factors is consistent with the chosen structure of the GTM. The supply and demand-related factors will be
treated in the Regional Component Models whereas the link-related factors will be addressed in the Linkage System.
Operationally, the Regional Component Models will provide information on the supply and demand potentials of their res- pective regions. This may be in the form of supply and demand functions which are sensitive to prices on the world market, or just simply a price-sensitive net supply function for each
region. Then for any set of world market prices proposed by the Linkage System, the Regional Component Models can compute con- sistent levels of export and lknport activity.
The Linkage System will be designed to compute a price
vector which is consistent with the set of bilateral trade flows calculated using a particular flow-determining mechanism. Since this latter mechanism will itself be flexible to allow various theoretical assumptions to be explored, we do not intend to elaborate any further on the Linkage System at this stage. It will be the subject of detailed discussion in the companion paper
(Andersson, Batten, 3ohansson, Kallio, 19831.
In this first paper, we have concentrated instead on the substantive conceptual and empirical issues pertaining to the development of a Global Trade Model CGTMl for IIASA1s Forest Sector Project. We began by defining the major objective of the GTM exercise as the provision of a quantitative tool for the
GLOBAL TRADE MODEL
REG I ON R E G I O N
X A
R E G I O N
SYSTEM B
.
R E G I O N C
. . . . . . .
R E G I O N DF i g u r e 1 4 . I n t e r f a c e b e t w e e n R e g i o n a l C o m p o n e n t M o d e l s and t h e L i n k a g e S y s t e m .
FOREST TRADE DATABASE
Trade flows, intensities, prices, inertia
Historical Trade Flows and Prices
SYSTEM Trade preferences Trade barriers
Transportation costs Freight capacity
(
Price formation mechanismsFlow-determining mechanisms
Potentials Demand
I
Flows Prices ®IONAL COMPONENT MODELS
Forest dynamics Ecological balance Technological change Changing capacity Consumer preferences Product innovations
Substitution Production costs
Figure 15. The interdependencies of the GTM.
long-term analysis of structural changes in the pattern
(bilateral flow volumes) and terms [value and conditions) of world-wide trade in forest products. The scope of the GTM
encompasses all the primary and secondary products of the entire forest sector, namely forestry and forest industries.
The need for policy relevance emphasizes the advantages of a scenario approach. Problems of product classification and regional subdivision have been addressed, and the notion of strategic aggregation has been introduced to provide an import- ant element of flexibility with respect to the linkage procedure.
Historical aspects of structural adjustment in the trading patterns of certain forest products have been examined, and
ample evidence points to the embodiment of a considerable degree of inertia in the trade patterns of various exporting nations.
The results of recent spectral analyses of export patterns in forest products over a twenty year period suggest that a
sequential model with 5-yearly intervals can provide scenarios from which the business cycle has been eliminated. To retain this desirable property, 5-yearly intervals have been adopted for the GTM. It Is impo~tant to observe that all available
evidence indicates that also in cases where shorter-term fluctua- tions are not insignificant, they do not affect the longer-term pattern of change.
The substantive determinants of world trade adjustments in the long-term have been decomposed into three components, namely
(i) supply-related factors, CiEI demand-related factors, and (iii) link-related factors. It is concluded that in order to develop a GTM which is capable of addressing each of these
determinants of structural change, a set of Regional Components and a Linkage System will be required, The former will address the factors related to supply and demand potentials, whereas the latter will accommodate the link-related information.
The choice of a suitable Linkage System must not only be consistent with observed trajectories of structural change in the trade patterns, but also be flexible enough to generate a wide range of scenarios based upon different opinions and
assumptions concerning future trade possibilities. The genera- tion of alternative trade scenarios will not be restricted to
t h e t r a d i t i o n a l t y p e of s e n s i t i v i t y a n a l y s i s , namely t h e s p e c i - f i c a t i o n o f c e r t a i n u p p e r and l o w e r bounds f o r k e y exogenous o r endogenous v a r i a b l e s . I n s t e a d , t h e s c e n a r i o c a p a b i l i t y w i l l b e e x t e n d e d t o t h e t h e o r e t i c a l s t r u c t u r e o f t h e model i t s e l f and t h e a c t u a l mechanisms by which t r a d e p a t t e r n s may a d j u s t o v e r t i m e . T h i s a d d i t i o n a l f l e x i b i l i t y w i l l a l l o w a much r i c h e r r a n g e o f t r a d e p o l i c y a l t e r n a t i v e s t o b e a s s e s s e d , and i m p l i e s a c o m p o s i t e m e t h o d o l o g i c a l s t r u c t u r e f o r t h e G l o b a l T r a d e Model.
ACKNOWLEDGMENTS
The authors wish to acknowledge valuable contributions to this paper in the form of creative comments or useful
material from h e Andersson, Christer Anderstig, Ann Francescon, Wolf-Dieter Grossmann, Lars LBnnstedt and the former Demand
Supply and Trade Group at IIASA C~arius Adarns, Anders Baudin, Sten Nilsson, and Uno Zachrisson).
.
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