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TRIST Manual: Using Examples From TRIST Nigeria
TRIST Manual: Using Examples From TRIST Nigeria
TRIST Manual: Using Examples From TRIST Nigeria
TRIST Manual
Using examples from TRIST Nigeria
www.worldbank.org/trade/TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Content
1. Relevance of TRIST
2. The trade model in TRIST
3. Data requirements and data
preparation
4. Importing data into TRIST
5. Making Simulations in TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
1. Introducing TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Introduction
Features of TRIST
• Uses import and revenue data at the transaction
level
– Includes not only collected tariff but also collected surcharge and VAT
– Exemptions taken into account
– non-ad valorem tariffs can be taken into account
Where we stand
• TRIST have been developed for the following countries:
Tanzania, Ethiopia, Zambia, Madagascar, Malawi, Tunisia,
Morocco, Nigeria, Mauritius, Bolivia, Albania,
Mozambique, Kenya, Seychelles, Jordan, Syria (more to
come)
• Existing TRISTs can be downloaded free of charge at
www.worldbank.org/trade/TRIST
• We have offered hands-on training on how to use TRIST
in Tanzania (twice), Zambia, Madagascar, Mauritius,
Malawi, Ethiopia, Syria (twice), Seychelles, Tunisia and
Bolivia
• We are constantly working to further improve TRIST and
respond to the feedback we receive
• So far, TRIST will soon available in French and Spanish
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
4 calculation steps
• Step 1: Price change for each good and exporter
• Step 2-4: Model the import response of trade flows. Example: preferential
reduction in the tariff on imports from country A
Exporter substitution effect: Imports from other countries are replaced with
Imports from country A following a reduction in the domestic price of imports from
country A. Total imports remain unchanged. The size of the effect is determined by
the exporter substitution elasticity.
FINAL RESULTS
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Domestic
Sales by domestic firms Imports Substitution
Exporter
Country A Country B Country C Country D Substitution
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Assumptions
↑ ↓
Exporter substitution
effect -
↑ ↑ ↓
Domestic substitution
Effect
↑ ↑ ↑
Demand effect
↑
Total effect In theory ambiguous In theory ambiguous
(depends on (depends on
elasticities), in elasticities), in
practice almost practice almost
always always
↓ ↓
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data requirements
• The following data is required for all import transactions in the latest available
year. Typically, this data can be obtained from the customs authorities.
HS Count CPC Import Tariff Tariff Excise Excise VAT VAT Other Other
code ry of value paid exempt tax paid tax paid exempt taxes taxes
origin ed exempt ed paid exempt
ed ed
01051110 USA 40000 100 10 0 0 0 15 0 0 0
39252000 BRA 400GM 500 100 0 0 0 75 0 0 0
42021210 DEU 90000 1200 0 120 0 0 0 180 0 0
11029000 ZMB 40000 400 40 0 80 0 60 0 0 0
… … … … … … … … … … … …
The hscode The Customs Procedure Code (CPC) Collect information on all taxes
(typically 8 digits, identifies the customs regime under applied at the border and exemptions
sometimes more) which a good enters the country. granted for these taxes. If information
identifies the type These codes are necessary to identify on exemptions is not available, it can
of product imports that have to be removed from be calculated as:
the dataset during the data cleaning Exemptions = [tariff rate] * [import
procedure. You will need a table that value] – [tariff paid]
explains the meaning of these CPC (note that for excise, the tax base is
codes (from customs) as they differ often the tariff inclusive value of
from country to country. imports, and for VAT, the tariff and
excise inclusive value of imports)
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Data preparation
Once the data has been collected, three preparation steps
have to be carried out:
In this example with CPC codes from Mauritius customs, 400GM refers to government imports and
90000 refers to imports into EPZs. These observations would be dropped. CPC code 40000 refers to
regular imports for home consumption, so these observations would be kept in the dataset.
CPC description
When processing the data in Excel, a useful way to identify and delete observations
with a certain CPS code is the „filter‟ option. To activate the filters, go to „data‟ ->
„filter‟ -> „auto filter‟. Then, click on the dropdown menu that appears in the field with
the CPC codes. This will allow you to filter your data to display only observations
with a certain CPC code. One after the other, choose the CPC codes you want to
drop and delete the observations with these CPC codes. It is also possible to
perform the cleaning procedure in other software packages such as Access.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
This example shows import data for Burundi. The dataset was sorted by the value
of imports and a variable was constructed that shows the share of each trade flow
in total imports. Only one trade flow has an import share of more than 1%. A good
first step to verify whether this might be an error is to look up the HS code*) to
determine what kind of product is being imported. In this case, code 10051000
refers to corn. A quick internet search for „food‟ „Burundi‟ „2007‟ confirms that
following a bad harvest, Burundi had to import significant quantities of food from its
neighboring countries in 2007. Thus, this large import flow is plausible and can be
kept in the dataset. Otherwise, it would have to be deleted.
*) To find the exact definition of an HS codes at the 8 or 10 digit level, refer to the customs schedule of the country you are
working with. However, HS codes are harmonized for the first six digits, so a more aggregate definition can be found by
looking up the first six digits of the code at any online sources for HS codes, eg.
http://www.foreign-trade.com/reference/hscode.htm
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
The next step is to construct a variable for applied tariff rate (tariff revenue /
imports). Then, sort by this variable to identify outlier values. In this case, a number
of observations have applied tariff rates of more than 1000%, way above the
highest advalorem tariff rate applied by Burundi tariff schedule (30%). A possible
reason for very high (advalorem) applied tariff rates can be the presence of a
specific tariff (that is, a tariff that is applied per unit of an import rather than on its
value) on very low value items. At this point, it is crucial to verify with customs
whether there are indeed specific tariffs on the goods in question or whether these
observations reflect data entry errors. In case of doubt, it is preferable to drop such
observations as they might otherwise distort the TRIST results.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Repeat the same procedure for the applied excise and VAT rates. It is important to
find out from customs what exactly the tax base for each tax is, ie: Does it include
tariffs? If so, is it based on the applied or the statutory tariff (ignoring exemptions)?
Does it include any other taxes?
The standard version of TRIST assumes that excise tax is applied on import value
+ tariff revenue and VAT on import value + tariff revenue + excise revenue. If this is
different in your country, please contact the TRIST team (see contact details on
the first slide) for an adjusted TRIST version.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
One row for each product The cells contain totals for the following five variables for each country and
imported, identified by the product (a blank indicates zero total). Make one table for each variable:
HS code. It is crucial that Imports
these codes (and their Collected tariff revenue
order) are exactly the Statutory tariff revenue (=collected tariff revenue + exemptions
same in all five tables. Excise revenue
VAT revenue
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
From the original dataset, the following information was imported into MS Access:
HS code
Country of origin
Import value
Collected tariff revenue
Statutory tariff revenue (=collected tariff revenue + exemptions)
Excise revenue
VAT revenue
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Choose ‘Imports’ as
the third variable.
Choose ‘HScode’ Select ‘sum’ and
as the first ‘value’: This tells
variable. Select Access populate the
‘group by’ and cells with the sum of
‘row heading’: imports of each
This tells Access product (identified by
to use this ‘HScode) from each
variable to trading partner
identify the (identified by
products in the ‘Origin’).
rows.
• We thus begin with the “imports” data. Open the file containing the
cleaned and organized raw data on imports and select the entire
data set, including the HS codes as well as the header row with the
trading partner names.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• Once you have copied the selected data, press “Click here”. This
tells TRIST to upload the “imports” data set. This process may take
some time. Please be patient and wait until a message box appears
informing you about the success of the data upload.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• Please familiarize yourself with the information on the left and the
right of the worksheet. Double-check that the basic information, the
tax definitions and the descriptive statistics are as expected. If not,
you might want to go back and check for whether you have done the
data cleaning and formatting correctly.
• The next step is to define country groups.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• In the background of the window, you should see a new column appearing
containing the name of the group you have created and the names of the
countries included in it.
• Proceed like this to define all country groups that are interesting in your
context. When you are finished, press “Close” to close the “Country Groups
Management Panel”. TRIST will then regroup the data.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• A “1” in the column belonging to a given product indicates that the product
belongs to that group. A “1” in the column “Overall Selection” indicates that
a product is presently selected to be included in the TRIST simulation.
• Notice that some products belong to multiple groups (groups overlap).
• The default is to include all product groups (By default, “Include” is chosen
from the drop-down menu above the “All Products” column).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• This is not intended to prevent users from making changes in these cells if they
wish too. It is just a reminder that these cells are related to the basic functioning
of the model and you should only change them if you are sure that you know
what you are doing.
• To unprotect any worksheet, click on „tools‟ -> „protection‟ -> „unprotect sheet‟
5. Making Simulations in
TRIST
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• We are now ready to open the actual simulation tool and define and
apply tariff reform scenarios
• You may want to close the data aggregation tool at this point in
order to give Excel more memory in working with the actual
simulation tool
• Let‟s open the “TRIST simulation tool template” and save it right
away.
• Hint: Please make extensive use of the Help File that is supplied
together with the tool.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• The first worksheet that opens when you open the simulation tool is
“TRIST”.
• Now, please click on “Control Panel”.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Customizing TRIST
Importing Data
• If the data was imported successfully, you should see the country groups
you previously defined under the heading “2. Tariff Change Scenarios”
• Let‟s close the control panel for now and have a look around in the
worksheet.
• To the right of the country groups you should see “No tariff change” under
the heading “Selected Scenario” . This implies that the current scenario is to
leave all tariffs as they are. If you click on any of the cells saying “No tariff
change”, you are in the drop-down menu that allows you to choose any
scenario that has previously been defined.
• TRIST allows you to simultaneously apply separate reform scenarios for
each country group.
• Below the reform scenarios you can see the elasticities for the trade model,
which you can customize in the “Control Panel”, as well as a drop-down
menu which tells you whether production data is taken into account or not.
• In the case of Nigeria, production data is not available.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Worksheets
Let us briefly discuss the content of the remaining worksheets in TRIST
Managing Elasticities
• Let‟s go back to the worksheet “TRIST”
• If you click on “Control Panel” and “Manage Elasticities”, you can
choose the elasticities for the trade model underlying TRIST.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Managing Elasticities
• Notice that TRIST also allows you to choose from two different sets of
estimated elasticities that are product specific (SMART or WB paper)
• Please check the box for “Use adjustment factor” if you would like
elasticities to differ between country groups and products. In case you do,
go to the worksheet “Raw Data”. There you can choose a value by which
the elasticity is to be multiplied for each product and country group. This
option gives you full flexibility in defining your elasticities.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
1. Choose a product group you would like to apply a separate tariff scenario to by
simply choosing from the “Affected Products” drop-down menu
2. Choose a type of tariff change to be applied as well as the corresponding parameter.
Some examples:
- “Fixed value” with parameter “0” implies that all tariffs are set to zero
- “Linear cut” with parameter “10” implies that all tariffs are cut by 10%
- “Cap value” with parameter “10” caps all tariffs at 10%
- “Swiss formula” with parameter applies a swiss formula cut
3. Choose the “Tariff base” to which the change is to be applied. Example: a “Linear cut”
of 10% to the Statutory tariff implies that the new tariff is equal to the statutory tariff
cut by 10%.
4. Finally, click on “Add Definition to the scenario”. Then save the scenario.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Copy the entire ‘hscodes’ column from the ‘detailed results’ worksheet into a
new Excel file. Make sure to use the ‘paste special’ -> ‘values’ function.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
Also copy pre-reform imports from the EU and the change in total tax revenue
(tariffs, VAT, excise) due to the reform.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• Given that we can only exclude 20% of total import value from the
EU, we are looking for products were revenue losses are high
relative to the import value from the EU. Thus, we add a column that
calculates the revenue loss / imports from EU
After entering the column heading,
start in the first data field of the
column (D2) and enter the formula:
=C2/B2
C2 is the data field with the revenue
change for this product, B2 contains
imports from EU. Then, fill out the
cells all the way to the bottom of the
column (double-click on the little
rectangular on the lower right hand
side of the selection frame).
For rows with 0 imports from the
EU, you will see an error message
(‘#DIV/0!’).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• The next step is to sort the dataset by our newly created variable to identify
those products that have the highest ration between revenue change and
imports from the EU.
Select all your data. Then, click on ‘data’ and ‘sort…’. In the window that opens
select the newly defined variable, ‘revenue change / EU imports’ under ‘sort by’
and click ‘OK’.
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• It is now simple to import the 20% of trade that are most revenue
sensitive into TRIST.
• Open the “TRIST data aggregation tool” workfile and open the
“Data imports assistant”.
• Navigate using the “Next” button until you arrive in the “Optional
step: EPA exclusion list” window.
• Simply select and copy all hscodes in your worksheet for which the
value in the column “cumulative EU imports” is smaller than 0.2
(20%).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• Please save the scenario as “EPA with exclusion list”. Closing the
control panel, we are ready to apply the new scenario (see next
slide).
Manual for the Tariff Reform Impact Simulation Tool (TRIST)
• You may want to have a look at the “Results” worksheet once the
scenario has been applied. Notice that the loss in tariff revenue has
fallen to 14% while the loss in overall trade tax revenue is down to
9%.
• This little exercise shows that an informed choice of sensitive
products can greatly attenuate the revenue impact of a PTA.
• Exercise: see what happens if 40% of trade can be excluded