Impact on Demand for Water upon Entering WTO -A Taiwan Case Study

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1 Impact on Demand for Water upon Entering WTO -A Taiwan Case Study C.E. Chou, S.H. Hsu, P.C. Li and C.M. Tseng 5 th Conference on Global Economic Analysis June 5 7, 2002

2 Water Resources in Taiwan Unevenly distributed among seasons, regions and users Difficult to retain A scare resource Supply is limited; demand is increasing Demand-side management is essential Requires an economic analytical tool

3 The Issue of Water Distribution Agriculture sector owns 3 quarters of water, but the production is declining. Industrial and domestic sectors are growing and facing water shortage. There is uneven distribution of water among water users.

4 Accession to the WTO Taiwan becomes a member of the WTO in Jan Agriculture sector is expected to be hurt, and some industrial sectors will continue to grow Worsen the situation of water distribution

5 WATERGEM and MR-WATERGEM WATERGEM is a single-country water resources CGE model; MR-WATERGEM is a multi-regional water resources CGE model Both are linked to GIS to provide geographic information for water resources management

6 MR-WATERGEM Developed from the Australian ORANI with a SAM data structure A nested production structure Three water resources in the model: surface water, groundwater and tap water. Household consumption, capital formation and foreign demand follow the standard assumptions of ORANI

7 Region R s production Leontief Composite Good 1 Composite Good C Indirect Taxes Primary Factors Composite Water CES CES Functional Forms Input or Output Labor Land Capital Surface Water Ground Water Tap Water Production Structure of MR-WATERGEM

8 Region North Region Central Region South Region East Region North Region Central Region South Region East ADD ADD Domestic Market Foreign Market Domestic Market Foreign Market CET CET Good 1 Good C CET Region R s output The Distribution Structure of Composite Good for MR-WATERGEM

9 Data Structure of MR-WATERGEM

10 Region NORTH Region CENTRAL Region SOUTH COM IND VA INS COM IND VA INS COM IND COM INT 1 FD 1 Region NORTH IND SALE 1 (diagonal) Subsidy 1 RM 12 (diagonal) RM 13 (diagonal) VA VA 1 INS Tarriff 1 INDTAX 1 AGGVA 1 INTINS 1 COM INT 2 FD 2 Region CENTRAL IND RM 21 (diagonal) SALE 2 (diagonal) Subsidy 2 RM 23 (diagonal) VA VA 2 INS Tarriff 2 INDTAX 2 AGGVA 2 INTINS 2 COM INT 3 Region SOUTH IND RM 31 (diagonal) RM 32 (diagonal) SALE 3 (diagonal) VA VA 3 INS Tarriff 3 INDTAX 3 Region EAST COM IND RM 41 (diagonal) VA INS RM 42 (diagonal) RM 43 (diagonal) FOREIGN SECTOR FOR M 1 M 2 M 3 TOTAL S 1 S 2 S 3 Total Supply to Region NORTH Total Output of Region NORTH Total Value-Added Disposition of Region NORTH Total Institutional Expenditure of Region NORTH Total Supply to Region CENTRAL Total Output of Region CENTRAL Total Value-Added Disposition of Region CENTRAL Total Institutional Expenditure of Region CENTRAL Total Supply to Region SOUTH Total Output of Region SOUTH

11 Region EAST FOREIGN SECTOR VA INS COM IND VA INS FOR TOTAL D 1 Total Demand of Region NORTH RM 14 (diagonal) E 1 Total Dispense of Region NORTH Total Value-Added Income of Region NORTH NETFOR 1 Total Institutional Income of Region NORTH D 2 Total Demand of Region CENTRAL RM 24 (diagonal) E 2 Total Dispense of Region CENTRAL Total Value-Added Income of Region CECTRAL NETFOR 2 Total Institutional Income of Region CENTRAL FD 3 D 3 Total Demand of Region SOUTH Subsidy 3 RM 34 (diagonal) E 3 Total Dispense of Region SOUTH Total Value-Added Income of Region SOUTH AGGVA 3 INTINS 3 NETFOR 3 Total Institutional Income of Region SOUTH INT 4 FD 4 D 4 Total Demand of Region EAST SALE 4 (diagonal) Subsidy 4 E 4 Total Dispense of Region EAST VA 4 Total Value-Added Income of Region EAST Tarriff 4 INDTAX 4 AGGVA 4 INTINS 4 NETFOR 4 Total Institutional Income of Region EAST M 4 S 4 Total Value-Added Disposition of Region SOUTH Total Institutional Expenditure of Region SOUTH Total Supply to Region EAST Total Output of Region EAST Total Value-Added Disposition of Region EAST Total Institutional Expenditure of Region EAST Total Supply = Total Demand

12 The Procedure of Data Construction

13 Use nation s input coefficients to adjust RAS Input-Output table for 4 regions in 1996 Balance the household;s supply and demand Aggregate county data into region Intermediate input for Region Calculate intermediate by county Calculate regions the value of trade Calculate trade value for services. Use gravity model to calculate interregion trade. I-O matrix balancing Region s imports and exports to foreign countries the input Use LQ,POLQ,CILQ,SDPto find out the share of output for own use. Use transportatio n data to calculate region s trade volume with foreign countries. Calculate the supply share not produced by own region Aggregate into 45 sectors Inter-region trade Get investment data for reations Changes in Inventories Invento ries at nation level Use the value of output as shares to assign the investment to regions Use national level as control total to adjust Government Expenditure Map HH expendit. Item into 160 sectors Calculate investment matrix Household s Consumption Household expenditure by county Aggregate into 45 sector Aggregate into 4 regions Calculate investment for counties Investment Use county output as shares Investment matrix(160 sector) at nation level Value added for agricultural and services Value added nation level Use pop as a base to calculate the share for regions. Use national level as a control total to adjust. Use share of output for each region. at Aggregate industries into 45 sectors 1996 input-output tables (nation level) Use nation level data as control total Use nation input - output structure for constructing region shares Divide the nation data into 4 regions Shares structure Value-added structure Industrial cost structure data by county 1996 Census Data Determine the items including in the valueadded. Value added in service sectors The Procedure for Constructing MR-WATERGEM s Data

14 Policy Simulation Scenarios Sim 1: MR-WATERGEM Sim 2: GTAP + MR_WATERGEM

15 Simulation Results

16 Macro Economic Impacts of WTO Accession (percentage change) Simulation 1 Simulation 2 Real GDP Nominal GDP Employment GDP Deflator

17 Impacts on Regional Economy of WTO Accession (percentage change) Simulation 1 regions Real GDP GDP Deflator Employment Nominal GDP Investment Exports North Central South East Simulation 2 regions Real GDP GDP Deflator Employment Nominal GDP Investment Exports North Central South East

18 Impacts on Sectoral Outputs of WTO Accession (Percentage Change) Simulation 1 Simulation 2 Sec. Description North Central South East North Central South East 01 Agriculture Livestock Forestry Fishery Mineral Proc Food Beverage Tobacco Textile Apparel Leather Wood & Bamboo Pulp & Paper Chemical Fiber Plastic Plastic Prod Misc. Chemical Petroleum Non-M etallic Steel & Iron Misc. Metal M etallic Machinery Domestic Electronic

19 Impacts on Sectoral Outputs of WTO Accession (Percentage Change) 26 Electronic Prod Comm. Prod Electronic Electrical Trans Equip Misc. Prod Residential Cons Public Construction Electricity Gas Water Warehousing Wholesale Finance & Insur Real Estate Hotel & Rest Business Ser Public Service Edu & Med Other Ser

20 Sectors Impacts on the Surface Water of WTO Accession (10,000 tons) Simulation 1 Simulation 2 North Central South East North Central South East 01 Agriculture Livestock Forestry Fishery Mineral Proc Food Beverage Tobacco Textile Apparel Leather Wood & Bamboo Pulp & Paper Chemical Fiber Plastic Plastic Prod Misc. Chemical Petroleum Mon-Metallic Steel & Iron Misc. Chemical Metallic Machinery Domestic Electronic

21 Sectors Impacts on the Surface Water of WTO Accession (10,000 tons) Simulation 1 Simulation 2 North Central South East North Central South East 26 Electronic Prod Comm. Prod Electronic Electrical Trans Euip Misc. Prod Residential Cons Public Cons Electricity Gas Water Warehousing Wholesale Finance & Insur Real Estate Hotel & Rest Business Ser Public Service Edu. & Med Other Ser

22 Sectors Impacts on Groundwater of WTO Accession (10,000 tons) Simulation 1 Simulation 2 North Central South East North Central South East 01 Agriculture Livestock Forestry Fishery Mineral Prod. Food Beverage Tobacco Textile Apparel Leather Wood & Bamboo Pulp & Paper Chemical Fiber Plastic Plastic Prod Misc. Chemical Petroleum Non-Metallic Steel & Iron Misc. Metal Metallic Machinery Domestic Electronic

23 Sectors Impacts on Groundwater of WTO Accession (10,000 tons) Simulation 1 Simulation 2 North Central South East North Central South East 26 Electronic Prod Comm. Prod Electronic Electrical Trans Equip Misc. Prod Residential Cons Public Cons Electricity Gas Water Warehousing Wholesale Finance & Insu Real Estate Hotel & Rest Business Ser Public Ser Edu. & Med Other Ser

24 Sectors Impacts on Tap Water of WTO Accession (10,000 tons) Simulation 1 Simulation 2 North Central South East North Central South East 01 Agriculture Livestock Forestry Fishery Mineral Proc Food Beverage Tobaccp Textile Apparel Leather Wood & Bamboo Pulp & Paper Chemical Fiber Plastic Plastic Prod Misc. Chemical Petroleum Non-Metallic Steel & Iron Misc. Metal Metallic Machinery Domestic Electronic

25 Sectors Impacts on Tap Water of WTO Accession (10,000 tons) Simulation 1 Simulation 2 North Central South East North Central South East 26 Electronic Prod Comm. Prod Electronic Electrical Trans Equip Misc. Prod Residential Cons Public Cons Electricity Gas Water Warehousing Wholesale Finance & Insu Real Estate Hotel & Rest Business Ser Public Ser Edu. & Med Other Ser

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